ORAL ANSWERS TO QUESTIONS

CHILDREN, SCHOOLS AND FAMILIES

The Secretary of State was asked-

All-through Schools

John Mann: What plans his Department has for the development of schools for three to 18-year-olds.

Iain Wright: The decision to create so-called all-through schools is one for local authorities to take. There are currently 25 such schools, with a further four planned. A majority of them cater for pupils aged three to 18 and they include academies as well as those maintained by local authorities. We are currently examining the benefits of and challenges faced by all-through schools, with the aim of sharing good practice.

John Mann: I thank the Minister for that answer, and I know that the ministerial team will be keen to visit Serlby Park three-to-18 school, as it has recently knocked back a Tory council attempt to close it down. Is he prepared to consider whether his Department could assist with some specialist advice on how it can free itself from local authority control by becoming an academy?

Iain Wright: I congratulate my hon. Friend, who is one of the best campaigners in the business, and certainly in this House, on his campaign to save Serlby Park school. I understand that on 19 November he presented a community award to Brett Lindsay, a sixth-former who campaigned to save the school. My hon. Friend the Minister for Schools and Learners, a near parliamentary neighbour of his, is very keen to visit Serlby Park and offer the special advice that my hon. Friend requires.

Michael Gove: The Secretary of State has stressed today that in any school environment, children from the age of three up and young people should be protected from racist views such as those of the organisation Hizb ut-Tahrir, which he rightly describes as abhorrent and which is banned in Germany. However, the schools and nurseries of the Islamic Shakhsiya Foundation have received taxpayers' money, even though the proprietor, Yusra Hamilton, was a Hizb ut-Tahrir activist, and she is married to its media representative, Taji Mustafa. The head teacher of one of the schools, Farah Ahmed, who has described her past activism with Hizb ut-Tahrir as irrelevant, has designed a curriculum that defines the ruling system of Islam as a khilafah or caliphate, in precise accord with Hizb ut-Tahrir ideology. What guarantees does the Minister have that those schools are absolutely not a front for, or linked in any way with, Hizb ut-Tahrir?

Iain Wright: I think the hon. Gentleman and the whole House would agree that racism cannot be justified in any shape or form, in schools or indeed anywhere. His right hon. Friend the Leader of the Opposition had a go at my right hon. Friend the Prime Minister about this on Wednesday and got it hopelessly incorrect, and he has had another attempt today. Might I suggest to him that he set out his views and concerns in writing so that my right hon. Friend the Secretary of State will be able to respond to him in full?

Michael Gove: I am very grateful to the Minister for that very fair reply. I wrote to the Secretary of State last Wednesday, and I am still waiting for a reply to that letter; I look forward to receiving it in due course. After it was written, the BBC reported that the headmistress of the Slough school, Farah Ahmed, had described democracy as a "corrupt tradition", the national curriculum as a tool of "systemic indoctrination" and western education as a threat to "our beliefs and values". Will the Minister and the Secretary of State investigate those views, that head teacher and the foundation following that revelation by the BBC?

Iain Wright: I will certainly ensure that those claims and allegations made by the hon. Gentleman at the Dispatch Box and by the BBC last week are investigated. I reiterate what I said a moment or two ago-my right hon. Friend the Secretary of State will respond in full to the concerns that have been raised.

Barry Sheerman: Does my hon. Friend accept that through-schools are an interesting pilot? One in my constituency, Netherhall campus, which since last Thursday has been assured that it will encapsulate a studio school, will be a very important experiment. Will he ensure that it is an experiment in which we can play with the national curriculum to make it a through curriculum, without great disjunctions at seven, 11 and so on?

Iain Wright: My hon. Friend makes a very important point. The Department does not dictate or impose any particular type of school system, such as a two or three-tier system or all-through schools. It is for the local authority to determine what is necessary, based on the local priorities of the area. The minimal disruption that can be caused in all-through schools is certainly a good thing for local authorities to consider. There are only 25 of them, as I said in my original answer, and it is too early to decide whether they can be rolled out across the country, but they certainly have some benefits and challenges and are something that we are considering.

Haywood Engineering Specialist College

Joan Walley: What recent representations in respect of equal pay for staff he has received from Haywood engineering specialist college.

Vernon Coaker: This year we have received two letters from Haywood engineering specialist college on this matter and a further two letters from my hon. Friend herself. In addition, I have met her to discuss this matter. As I stated in my last letter to her, I am hopeful that it will be concluded in a positive way. The Stoke-on-Trent schools forum supports the position of the school, but a conclusion cannot be reached until the new chief executive takes up his post in the new year.

Joan Walley: I thank my hon. Friend for all the help that he has given us to get Building Schools for the Future funding in Stoke-on-Trent. In respect particularly of the Haywood high school specialist college, will he ensure that Stoke-on-Trent city council provides the resources needed to meet the equal pay claims from support staff, on the basis that the college adopted foundation status notwithstanding Government guidance that, in respect of such claims, foundation schools are to be treated
	"on a comparable basis to staff in community schools"?
	This has gone on far too long. Will he do everything he can to ensure that Stoke-on-Trent council attends to the matter?

Vernon Coaker: I congratulate my hon. Friend, who has worked tirelessly on the problem affecting Haywood engineering specialist college. I know that it is a source of great concern to her. I reassure her that I intend to come to Stoke in the near future to see her in her constituency, and meet her and my hon. Friends in the rest of the area to talk about several issues. By that time, I hope that the problem, which has gone on for far too long, will be resolved to the satisfaction of the staff at the school. I hope that when the new chief executive comes along, the progress that we all want will be made. I hope that all schools in Stoke benefit from BSF investment.

Free School Meals

Andrew Selous: What his most recent assessment is of the educational achievement of pupils eligible to receive free school meals.

Edward Balls: May I make it clear that I replied to the letter from the hon. Member for Surrey Heath (Michael Gove) this morning? I am only disappointed that he did not ask me those questions because I could have given him detailed answers.
	In the past decade, primary and secondary schools that serve the most deprived intakes have achieved the largest increase in key stage 2 and GCSE results. In schools with more than 50 per cent. of pupils eligible for free school meals, the proportion of pupils achieving five good GCSEs, including English and maths, has increased from 24 per cent. in 2005 to 33 per cent. in 2008-double the rate of increase in the least deprived schools.

Andrew Selous: Is it not unacceptable that under half of white British boys eligible for free school meals achieve the expected standards in English and maths at the end of their primary school stage? Does the Secretary of State agree that part of the answer is more new academies, such as the excellent All Saints academy in Dunstable in my constituency?

Edward Balls: Since I became Secretary of State, I have approved 136 new academies, precisely because they show that they can raise standards, including for white boys, in the most disadvantaged areas. Of course, it is disappointing that we have not seen faster progress for white boys, but, as I said, the exam results for pupils from the most deprived backgrounds have increased faster in the past 10 years. That is true for primary and secondary schools and for English and maths. We are narrowing the gaps through investing in good schools, good teachers and the one-to-one tuition that is needed for pupils to make progress.

David Taylor: The facts that the Secretary of State has given the House are interesting, but does he agree that the concept of free school meal status being an adequate measure of social or economic disadvantage has outlived its usefulness? There are better measures and we should start to pursue some improved statistic.

Edward Balls: My hon. Friend makes an important and interesting point, which I would be happy to debate with him and the Minister for Schools and Learners in due course. However, the question was about the progress that free school meal pupils had achieved in the past decade, and the answer is that they have made progress faster than the average pupil-and much faster than in the previous decade. The picture is therefore good and improving, but we need to do more to narrow those gaps.

David Laws: The report on social mobility by the Secretary of State's old friend the right hon. Member for Darlington (Mr. Milburn) earlier this year proposed a Liberal Democrat policy to improve the targeting of young people with educational disadvantages-the pupil premium. When will the Government formally respond to the right hon. Gentleman's report and when will they get on with introducing a pupil premium?

Edward Balls: We have already responded by setting out the way in which we will enhance information, advice and guidance. As the hon. Gentleman knows, a review of the pupil premium is going on at the moment. To be honest, as we have debated previously, a pupil premium could accompany an increase or a reduction in the amount of money that goes to the most disadvantaged. That would depend on whether the budgets were increasing or decreasing, but if we genuinely want to make progress, we have to guarantee that any pupil in years 3, 4, 5, 6 and 7 who falls behind will get one-to-one, catch-up tuition to get them back on track. That is in our pupil guarantee and our legislation. Rather than criticising and refusing to back our guarantees, the hon. Gentleman should match and support them. In that way, we can make more progress on closing the gap to which he refers.

Tom Watson: On free school meals as in so many other areas of policy, is it not right that Members of Parliament should set an example to young people by doing their homework before making inaccurate and sensational claims at the Dispatch Box?

Edward Balls: We all know what my hon. Friend is alluding to, and I will not go over that past territory other than to agree that getting homework right is very important.
	May I correct the record again for the House on an error made by my Department at the end of last year? In a parliamentary answer, we made an error when we said that the most disadvantaged pupils had seen their results go up by 13 per cent. over the last 10 years. In fact, the correct figure was 33 per cent. Our statisticians corrected that, we corrected the parliamentary answer and the Minister for Schools and Learning has written twice to correct it, but the shadow Secretary of State repeats that wrong statistic again and again-

Mr. Speaker: Order. The Secretary of State has made his position clear and I want to make progress on the Order Paper.

Michael Gove: I am very grateful to the Secretary of State for correcting his Department's mistake. I am also grateful to him for writing to me; I have not yet received that letter and I would be grateful for any clarification that he can give at the Dispatch Box.
	The Sutton Trust has expressed its deep concern about the continuing under-achievement of children eligible for free school meals. It says that far from acting as a great leveller, the current education system is perpetuating inequalities. Nearly 40 per cent. of pupils eligible for free school meals do not even get a single grade C at GCSE. The 16-year-olds who left school this year had their entire education under Labour. Sir Terry Leahy has expressed his concern that standards are still woefully low and Sir Stuart Rose has said that school leavers cannot do reading, cannot do arithmetic and cannot do writing. Are Sir Terry and Sir Stuart wrong?

Edward Balls: I am very concerned that the hon. Gentleman continues on his path of undermining the progress being made by pupils and teachers all over the country. As I said, 33 per cent. of children in schools with more than 50 per cent. entitled to free school meals are getting five good GCSEs with English and maths. The Minister for Schools and Learning has twice written to the hon. Gentleman-in January and again this autumn-but in his speech in November the hon. Gentleman repeated the wrong figure, even though he knows that it is wrong. Undermining confidence by peddling false statistics is the wrong thing to do: it is the hon. Gentleman's credibility that is now in doubt on this matter.

Sure Start Centres

Tony Lloyd: What methods he uses to assess the effectiveness of individual Sure Start centres.

Dawn Primarolo: Local authorities are responsible for managing the performance of their Sure Start children's centres. Most use a framework devised by my Department in 2007. The Department does not currently receive information on individual centres, but from 2010 Ofsted will have a duty to inspect individual centres and report to the local authority.

Tony Lloyd: Does my right hon. Friend agree that the real increases in educational attainment by children from disadvantaged backgrounds owe a lot to the Sure Start centres and what they have done for young people, especially in inner-city areas and the equivalent? Who in their right mind would want to get rid of those centres?

Dawn Primarolo: My hon. Friend is right. The national evaluation of 2008 identifies a Sure Start effect: parents have more positive parenting skills, better home learning environments exist and we can see the development of children. The Leader of the Opposition has said that he supports Sure Start, but he has also identified cuts of more than £200 million to its budget. That would hit the very poorest in our community.

Maria Miller: The Minister knows that we fully support Sure Start, especially its role in helping children who have the toughest start in life to have better early years education. Can she explain why she takes so little notice of Ofsted's figures, which show that after years of Sure Start children in the most deprived communities are twice as likely to attend a failing nursery as children in the richest areas, and that this situation is getting worse?

Dawn Primarolo: The hon. Lady will know that wishing support for Sure Start without committing resources to, and investment in, children's centres will never help to tackle the under-achievement that still exists in some parts of the country. She needs to come to the Dispatch Box now and commit her party to match all the spending to which the Government are committed, rather than cutting £200 million from Sure Start. Only then would we see the improvements that she allegedly wants in the performance of the very poorest in our community.

Children's Centres (Ealing, Southall)

Virendra Sharma: How many children's centres there are in the Ealing, Southall constituency.

Dawn Primarolo: Ealing local authority has a total of 22 designated Sure Start children's centres, offering services to more than 15,600 under-fives and their families. Of those, 10 are based in the Ealing, Southall constituency.

Virendra Sharma: In the light of the fantastic work done by those children's centres in my constituency, supporting some of the most vulnerable children and families, does the Minister agree that it would be disastrous if funding cuts closed two of them, as proposed by the Opposition?

Dawn Primarolo: Children's centres offer a full range of services, whether it be integrated early learning and care for children, the support given to families through the health service, the employment and training advice given to parents or the support that is particularly important for fathers. As my hon. Friend says, for his community, if one in five children's centres were closed, it would devastate the performance and ability of children. That is the policy of the Opposition, and we need to push them on that to deny it.

ContactPoint Database

Tom Brake: What progress has been made on the roll-out of the ContactPoint database; and if he will make a statement.

Kevin Brennan: Excellent recent progress has been made on ContactPoint. On 6 November, we announced that ContactPoint was beginning to be rolled out nationally to local authorities and front-line practitioners. We also published a report on the initial phase of the ContactPoint roll-out entitled "Lessons Learned from the Early Adopter Phase", which shows how ContactPoint is already making a positive difference daily to the practitioners who use it.

Tom Brake: Can the Minister explain why it is considered necessary to shield just some of the children's records on the ContactPoint database, when all children on the database could be at risk from some of the 400,000 people who can access it?

Kevin Brennan: There will be no special treatment for particular groups. Any decisions based on shielding would be based on decisions about the welfare of the individual child. I am sure the hon. Gentleman would agree that that is absolutely the right basis on which to take any such decisions.

Tim Loughton: If ContactPoint is going to make such a significant contribution to child protection, can the Minister say why the Government think it necessary that parents attending their children's school carol concert should be officially vetted, that parents who teach their children at home must undergo criminal record checks and that even teenagers taking part in the Government's compulsory community service scheme will face criminal checks? Is this not just getting barmy?

Kevin Brennan: Everything that the hon. Gentleman has just said is absolute rubbish. It constitutes the usual scaremongering and hyperbole from the Opposition, in an attempt to get headlines in the tabloid press, and it is not true. If he had bothered to ask a question about ContactPoint, I could have reminded him that it has the support of our national partners-including the National Society for the Prevention of Cruelty to Children, Barnardo's, Action for Children, Kids, the Child Exploitation and Online Protection Centre, the Children and Family Court Advisory and Support Service, and the Children's Society-and he ought to be supporting it.

Cyberbullying

John Robertson: What steps he has considered to assist teachers and parents to reduce the incidence of cyberbullying of children; and if he will make a statement.

Diana Johnson: The Department has given legal powers to schools staff to regulate the conduct of pupils inside and outside school premises, including by dealing with bullying on school buses or addressing cyberbullying that originates at home. In addition, DCSF has provided schools with guidance on how to prevent and tackle cyberbullying and provided parents with advice, through our sponsored Parentline Plus service, on how to spot all forms of bullying and the steps to take to stop it.

John Robertson: I thank my hon. Friend for her answer. I also congratulate her on the work done so far, but there is so much more that needs to be done. Cyberbullying is on the up. Schools have to be vigilant at all times, as do parents. However, a lot of my constituents feel that parents do not get enough advice to understand exactly what cyberbullying is.

Diana Johnson: My hon. Friend has raised the issue before and takes a keen interest in it. The Government are committed to ensuring that parents are as fully informed as possible about cyberbullying-and, of course, about all forms of bullying-and what they can do to stop it. Let me refer my hon. Friend to the national anti-bullying week, which took place in November. Thirty-thousand young people signed up to the "Laugh at it, and you're part of it" campaign, which was designed to draw attention to cyberbullying.

Mark Pritchard: The Minister will know that each school has an acceptable use policy, and one way to help teachers might be to extend those powers beyond the boundaries of the playground. Will the Minister look at this issue and see whether cyberbullies could be dealt with when they return from home to school if there has been cyberbullying between two pupils at the same school?

Diana Johnson: Schools, and head teachers in particular, already have a duty to deal with bullying, and schools have the power to deal with bullying, including cyberbullying, that takes place elsewhere-not just on the school premises.

Andrew Miller: May I tell my hon. Friend about the good work being done by Childnet in partnership with organisations as far away as Net-Aman in Egypt in bringing children together to discuss among themselves how to create better working practices for children and more children-focused systems on the net? This is the right way to proceed-to engage children in the decision-making process.

Diana Johnson: I know my hon. Friend has a great deal of experience in this area of information technology. I absolutely agree, and the Government are committed to ensuring that children and young people know and fully understand what they are doing when they go on the internet and how to protect themselves.

National Curriculum

Desmond Swayne: What plans he has for the future of national curriculum testing; and if he will make a statement.

Edward Balls: Following the report of the expert group on assessment on the future of national curriculum tests, which advised that objective tests at the end of key stage 2 were educationally beneficial and vital for public accountability, I have recently approved the Qualifications and Curriculum Development Agency's award of the main contract for delivering the 2010 tests to Edexcel.

Desmond Swayne: The National Association of Head Teachers says that the results-up to a quarter of them-are inaccurate to the extent of being one whole level out. If that is incorrect, will the Secretary of State tell us how he knows it is incorrect?

Edward Balls: As the hon. Gentleman may or may not know, we have established an independent regulator, Ofqual, which oversees and regulates the marking process and also deals with the appeals process. Because of the difficulties of the tests, there were more appeals than in the year before last and last year, but there is no evidence that the quality of the marking has deteriorated. I would be happy to set out more detail for the hon. Gentleman if he would like.

Fiona Mactaggart: I have the impression that the reason why Slough's key stage 2 results this year were not as good as they were in other parts of the education system is that we are still a small town that has the 11-plus. Will the Secretary of State please look at areas that retain the 11-plus and see whether the results at key stage 2 are different from those that would normally be expected?

Edward Balls: I would be happy to look at that for my hon. Friend. As she will know, the issue of selection is a matter for local authorities to decide, although Labour Members are clear that we do not want to see an increase in the number of grammar schools-a pledge that Conservative Members continually refuse to make. We have looked at the selective authorities of Gloucestershire and Kent to see whether there are particular issues to do with the interaction of selection and the national challenge programme, but on the issue of key stage 2 tests, we need to look more carefully at the details. I cannot give my hon. Friend an answer today, but I can definitely tell her that we will not be having any more grammar schools.

Nick Gibb: The Secretary of State will be aware that a third of those who fail to achieve the expected level in the three R's in the key stage 2 tests are children who qualify for free school meals. Does he therefore support a policy of replacing the key stage 1 standard assessment test with a simple screening test at the end of the second year of primary school to ensure that every child knows how to sound out words and is able to read a list of basic words? Is that not the best way of closing the achievement gap between the haves and the have-nots in our schools and in our society?

Edward Balls: That question goes to the heart of the debate-and to the heart of the confusion among the Opposition-on education policy. The fact is that there are 100,000 more young people now making the grade at age 11 compared with 10 years ago, but it is not possible consistently to say that every child should do a test in key stage 1 and learn phonics while at the same time having it as a policy that all schools should opt out of the national curriculum by becoming primary school academies. The hon. Gentleman's desire for phonics teaching is completely undermined by the policy of his hon. Friend the Member for Surrey Heath (Michael Gove) to abolish the requirement for phonics in the national curriculum. That would be the wrong thing to do-

Mr. Speaker: Order. I have been very generous to the Secretary of State today in allowing him to develop his arguments, but he will know that he must focus his answers on the policy of the Government rather than that of the Opposition.

Edward Balls: rose-

Mr. Speaker: No, the right hon. Gentleman has already done extremely well.

Educational Psychologists

Rob Marris: What is his Department's policy on the use of educational psychologists in schools.

Diana Johnson: Educational psychologists have a statutory function in respect of assessments required for statements for children with special educational needs. However, the Department believes that they can play a much wider role in helping schools with early intervention, identifying needs early, and helping to advise on appropriate support. More broadly, they can help to train school staff in particular subjects to enhance their skills and knowledge in respect of SEN. We continue to value and support the important work that they do.

Rob Marris: My hon. Friend will be aware that this year local authorities' voluntary contributions have raised only about half the funds required for the training of educational psychologists, and the picture is likely to be even worse next year. In the context of the statutory functions to which my hon. Friend has referred, will she look again at the possibility of direct Government funding for the training of educational psychologists, so that they need not continue to rely on voluntary contributions which are not forthcoming?

Diana Johnson: I wrote to all local authorities on 16 November, after the meeting that we held with the Association of Educational Psychologists, urging them to contribute to the funding. It is also worth mentioning that the Children's Workforce Development Council is developing a long-term and sustainable employer-led funding and training scheme. I shall meet the new general secretary of the Association of Educational Psychologists, Kate Fallon, very shortly to discuss the matter again.

Annette Brooke: Concerns are still being raised about the impact of the new qualifications route and its funding. Is the Minister continuing to monitor not only the current position but the future supply of educational psychologists, particularly in the light of the role that they must play in regard to early identification and early intervention?

Diana Johnson: I am continuing to monitor that very carefully. As I have said, we had a meeting in October, and I wrote to local authorities earlier this month. I plan to have another meeting in December to discuss the position. Further research is being conducted on work force planning for educational psychologists in the years ahead.

Lindsay Hoyle: Schools have waiting lists of pupils wishing to see child psychologists. Meanwhile, education authorities are cutting the number of psychologists to save money. How can the Minister ensure that the number does not continue to be reduced at a time when we should be trying to increase it in each education authority?

Diana Johnson: If Members wish to cite individual authorities that are experiencing that problem, I shall be happy to look into it further. We need to engage in long-term work force planning, but I should stress that educational psychologists are the employees of local authorities, and that local authorities are responsible for ensuring that their number is sufficient.

School Playing Fields

Bob Spink: How many school playing fields have been sold for development in the last five years.

Vernon Coaker: In the last five years, 51 applications involving the sale of school playing fields have been approved.

Bob Spink: School playing fields at Castle View on Canvey Island, Scrub Lane in Hadleigh and Jotmans in Benfleet in my constituency have recently been given up for development in one form or another. What on earth is going on in Essex county council education authority? Will the Government step in to enforce their excellent policy of protecting our school playing fields, which are so valuable?

Vernon Coaker: I do not know what is going on in Essex county council, but I should be happy to meet the hon. Gentleman to discuss it and see what we can do together.
	The hon. Gentleman has raised an important point about safeguarding school playing fields. He will know that in 1998 we changed the law to ensure that any sale of school playing fields had to be submitted to the Secretary of State for his agreement. Very few such applications have been made, because the criterion is very tight. The hon. Gentleman will also know that before 1998 considerably more school playing fields were sold, and that the receipts from the sale of any playing field-whether by an open school or a closed school-must be put back into either education or education-related leisure facilities.

Safeguarding Children (Ofsted Inspections)

Evan Harris: What recent representations he has received on the effects on schools of Ofsted's role in inspecting the safeguarding of children.

Dawn Primarolo: Safeguarding is not a new aspect of school inspection, but it has been given increased focus in the new inspection framework. Ofsted has issued detailed guidance on how safeguarding should be assessed during its school inspections.

Evan Harris: I am grateful to the Minister for her answer. Does she agree that what is important is safeguarding children, not sticking to rigid rules, and that if, for example, Ofsted finds that there is a problem with the single central record but that is put right, afterwards there is no need for the school in question to be judged inadequate in that regard, because that undermines the morale of the whole school for no good reason?

Dawn Primarolo: As the hon. Gentleman knows, schools are not marked down solely on account of minor administrative issues; Ofsted has assured us that that is the case. The hon. Gentleman raises the issue of a failure being identified during an inspection that is corrected subsequently. If it is corrected before the inspection is completed, that can be added to the assessment, but as he knows, the inspection is a snapshot and there is a gap between its taking place and the publication of the findings, so in some circumstances even though schools may have corrected matters, that snapshot cannot be changed. If the hon. Gentleman is worried about a particular issue, I will be more than happy either to speak to him about it, or to receive details in writing and look into it further.

Muslim Girls Boarding Schools

Gordon Prentice: How many Muslim girls boarding schools there are with more than 4,000 pupils in England.

Diana Johnson: To date, there are no Muslim girls boarding schools with more than 4,000 pupils established in England.

Gordon Prentice: My friend will know that there is a proposal on the drawing board for a huge 5,000-place independent boarding school for Muslim girls in my Pendle constituency. Does she believe, as I do, that the existence of very large, single-faith, single-gender schools can work against community cohesion, and that we should tread very carefully indeed?

Diana Johnson: My hon. Friend may be interested to know that the largest independent boys' boarding school at present is Eton, with 1,311 pupils, and the largest girls' boarding school is Cheltenham Ladies' College, with 640 pupils. The figure of 5,000 for the number of pupils at a boarding school would, therefore, be unprecedented, and we would obviously have to give very careful consideration to a proposal for a school of that size.

Academic Standards (Primary Schools)

Ann Winterton: What steps he plans to take to raise academic standards in primary schools.

Diana Johnson: Significant improvements have been made in primary school standards over the past 12 years, and this year's results are 17 per cent. higher than those of 1997. However, we recognise that there is still more to do to ensure that all children receive a world-class education. Our recent White Paper signalled a new approach to primary school improvement, which will include a comprehensive package of support for schools. We will be announcing detailed plans on that later in the week.

Ann Winterton: In seeking to raise primary school standards further, will the Minister look specifically at the teaching of British history, beginning right at the beginning of the curriculum and going through to secondary education, because nothing dismays me more than discovering while taking school parties around the Palace of Westminster that great chunks of British life and history are not known by them. Will the Minister take a serious look at this matter?

Diana Johnson: The hon. Lady will be reassured to know that British history is in the primary curriculum. We have just gone through a major consultation on the Rose proposals in respect of changes to the primary curriculum and we will bring forward legislation on that shortly.

Brian Jenkins: While improvements in academic standards are, of course, always welcome, like the rest of us my hon. Friend realises that catchment area plays a crucial role in respect of what young people can achieve. When are we going to start putting more emphasis on the added value that schools bring to young people?

Diana Johnson: Of course we must recognise that added value is very important, but we should celebrate the fact that our young people are leaving primary school better able to read, write and do their sums. Whereas in 1997 only 43 per cent. of our children could read, write and do their maths, the figure is now 61 per cent., and that is very good. Obviously, we need to improve further, but we have made vast improvements in the past 12 years.

Military History

Gerald Howarth: If he will encourage the teaching of Britain's military history in schools.

Vernon Coaker: History is compulsory in schools up to the end of key stage 3. The national curriculum for history requires pupils to be taught a substantial amount of British history; it covers the mediaeval, early modern, industrial and 20th( )century periods, and that includes studying the causes and consequences of various conflicts, including the two world wars, the Holocaust and other genocides.

Gerald Howarth: As we welcome 19 Light Brigade, representing the prowess of our military at this time, back from Afghanistan to the Palace of Westminster today, may I invite the Minister to be even more robust in ensuring that our young people are reminded of Britain's glorious military past and of our great battles such as Agincourt, Trafalgar and the battle of Britain? Will he ensure that these traditional subjects are on the agenda, rather than the sort of woolly stuff that Mrs. McCabe, that splendid headmistress, has been suggesting the Government are threatening our children with?

Vernon Coaker: I know that the hon. Gentleman spends considerable time raising these issues on a number of occasions, not only because of the passion that he feels about the subject, but because of his constituency interest. Given what is happening at the moment, it is obviously important that we reflect on what is taught in our schools to ensure that our young people grow up with the values that we want for them. He will know, because he will have looked into this, that, as the Under-Secretary of State, my hon. Friend the Member for Kingston upon Hull, North (Ms Johnson), has just said, British history is a part, and will form a part, of the primary school curriculum. If he were to read the content for the key stage 3 curriculum, he would see that many of the things that he has just mentioned are part of it-I am sure that he would welcome that.

School Refurbishment (Plymouth)

Linda Gilroy: What plans his Department has for the rebuilding and refurbishment of secondary schools in Plymouth.

Vernon Coaker: I am pleased to inform the House that Plymouth is one of 12 projects that will be joining the Building Schools for the Future programme today. It is for Plymouth to determine the pattern of school builds in consultation with the Department, Partnerships for Schools and the local community.

Linda Gilroy: I warmly welcome the go-ahead that has been given to £78 million of investment in our schools. Could my hon. Friend tell me what impact he hopes it will have on raising standards at schools such as Stoke Damerel community college, which he visited recently, and Lipson community college, which the Secretary of State has visited within the past year?

Vernon Coaker: First, I congratulate my hon. Friends the Members for Plymouth, Sutton (Linda Gilroy) and for Plymouth, Devonport (Alison Seabeck) on the work they did to campaign for Plymouth to be part of the Building Schools for the Future programme. Schools buildings are important, but to get BSF money authorities have to demonstrate that the new buildings are linked to school improvement and a strategy for change; clearly, standards are an essential part of any school building programme. When I went to Plymouth, I saw that one of the reasons why Plymouth has been successful with its bid is that it has clearly identified that the new school buildings will be a means by which it can continue to improve on the already excellent standards in its area.

Head Teachers (Retirement)

Simon Hughes: What proportion of head teachers he expects to retire in the next five years.

Vernon Coaker: We estimate that 38 per cent. of current head teachers will have retired by 2015. Dealing with the loss of their skills and experience will be not only a challenge, but an opportunity. We have invested £30 million, through the National College for Leadership of Schools and Children's Services succession planning strategy, to ensure that this demographic challenge is managed effectively. The national college continues to work closely with schools, local authorities and faith bodies around the country to find, develop and keep excellent head teachers.

Simon Hughes: Although the head teacher recruitment crisis may have eased slightly, Professor John Howson, who is widely respected as the best analyst of these issues, says that the crisis in recruiting heads is continuing. The Government have had 12 and a half years in office, so why is that the case and what do they propose to do in the next six months to make the prospect better?

Vernon Coaker: I said to the hon. Gentleman that the national college has been working exceptionally hard to develop succession planning. It has been out looking to identify people who might well be the heads of the future. The hon. Gentleman will know-perhaps he saw some of the reports over the weekend-that the national college said that there were more teachers now than before who were aspiring to be the head teachers of the future. One of the ways that we can get more head teachers is to keep reminding ourselves and everyone of the excellent job that our head teachers do, of the need for proper leadership in our schools and of the way in which, if we get that effective leadership, we can turn around any sort of school. I am sure that the hon. Gentleman would join me in saying that it is an excellent profession. May I take this opportunity to congratulate our head teachers on the work that they do?

Discipline

David Amess: What steps he is taking to improve standards of discipline in schools; and if he will make a statement.

Vernon Coaker: We have made a commitment that all schools will have good behaviour, strong discipline, order and safety. To secure this ambition, we have launched a new strategy to enable all schools to achieve good or outstanding behaviour standards. The strategy includes a range of measures to support and challenge schools. It builds on existing work that has resulted in the number of schools with inadequate behaviour being driven down to less than 1 per cent.

David Amess: What the Minister has said is splendid, but the reality of the situation is that more and more of our children are being excluded from school because of behavioural problems and Government targets. What is the Government's strategy for dealing with those children who, in reality, have behavioural problems?

Vernon Coaker: May I say to the hon. Gentleman that the number of young people being excluded from our schools with permanent exclusions has reduced? One of the most effective ways of dealing with behavioural problems in schools is what many schools do across the country-they have a firm code of conduct that is properly enforced with the support of the parents, alongside proper measures within the school to deal with those young people who cause a problem. One of the most effective ways of doing that, which I would encourage-in fact, I did it when I was a deputy head teacher-was to have internal methods of exclusion that keep young people in school and prevent them from having problems outside school while preventing them from undermining the educational entitlement of the other pupils in the class.

Topical Questions

Robert Key: If he will make a statement on his departmental responsibilities.

Edward Balls: Some local authorities, particularly in London, have been facing big and unexpected increases in the demand for primary school places. Earlier this year, the Schools Minister and I invited local authorities to bid for £200 million of extra investment to meet that demand. Following extensive discussions with the Local Government Association and the Association of Directors of Children's Services, I can tell the House that we have further increased this funding and we are today allocating £300 million to create an additional 15,000 primary places for four and five-year-olds across 34 local authorities.
	I can also tell the House that 11 local authorities are joining our Building Schools for the Future programme. They are Brent, Darlington, Devon, Havering, Kingston, Croydon, Norfolk, Plymouth, Sefton, Wakefield and Warrington. Two more, Lancashire and Tameside, have been able to move forward in the programme faster than expected. That adds up to £1 billion-plus of investment to rebuild or refurbish our schools-investment that would be put at risk by the Opposition's proposals to cut £4.5 billion.

Robert Key: I am sure that the House is very grateful for that ministerial statement. If the Secretary of State agrees with me that how well we look after children with severe learning difficulties is a measure of what sort of country we are, will he find out why it was that only last week in Wiltshire the local council forced a family to a tribunal because it did not want to pay for the residential care recommended by all that child's teachers?

Edward Balls: I would say first of all that I think that Members on both sides of the House will be grateful for the £1 billion of extra investment that is going into primary school places and new buildings. I know that in Salisbury that is a little further down the track-the hon. Gentleman will have to hope for a Labour Government to be re-elected if he is going to get the new schools in his constituency. On the particular points that he raises, I am happy to look at the details. It disturbs me greatly if any local authority is ignoring advice when a child with severe learning difficulties needs residential care. That should not be happening. These are local decisions, but I am happy to look at the details and see what we can do to help.

Robert Flello: Following the previous Schools Minister's extremely helpful intervention to help save Trentham high school, would the current Schools Minister like to visit my constituency to see for himself the problems associated with the so-called Springfield academy site? At the same time, perhaps he would like to visit Trentham high and my colleagues in other parts of the city to see what is happening in those schools.

Edward Balls: The Schools Minister will be extremely happy to go to Stoke and visit as many schools as my hon. Friend would like on the day allocated for the visits. I am sure the Minister is very much looking forward to it.

Tom Brake: Ministers will be aware of the concerns of home educators about the Badman report recommendations. Would the Secretary of State be willing to meet a group of local parents to hear those concerns?

Edward Balls: The Schools Minister has been doing so; we have had a series of meetings. We have responded to some of the concerns and set out the evidence clearly. The legislation will be debated in the House. Although it is important to listen to parents' concerns, we have a balance to strike. We have a responsibility to the children as well, to make sure they are safe and that they are getting a proper education. When the hon. Gentleman looks at the detail, I hope he will be able to join what I hope will be a cross-party consensus that the proposals are good, sound and fair, and that they are to the benefit of children but respond properly to the concerns of some of the parents.

Alison Seabeck: I thank my right hon. Friend for his announcement on BSF and the further massive investment in new school building in Plymouth. When does he expect work to begin on the ground?

Vernon Coaker: I thank my hon. Friend for that comment, and I again thank her and my hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) for their work in putting forward Plymouth's case. We expect the plans between January and March next year, and that building will start soon afterwards.

John Leech: On 9 July, on Imagine FM, the Secretary of State said that he would love to visit Ewing school-a special school in south Manchester threatened with closure. Apparently, the Secretary of State is now unable to visit. Is this another broken promise from a broken Labour Government, or is the Secretary of State just too embarrassed to visit a local school rated by Ofsted as good with outstanding features, but threatened with closure by a local Labour council?

Edward Balls: I am very happy to visit any excellent school-special or otherwise-and I am very happy to go to Manchester, Withington to see what is happening on the ground. I have been there once and seen new buildings being built, standards rising and great teachers-all delivered by a Labour Government, and I hope at the next election supported by a Labour MP.

David Crausby: May I tell my right hon. Friend the Secretary of State that the Sure Start children's centres he has visited in my constituency are extremely successful? Can he absolutely assure me that they will be allowed to thrive under the next Labour Government?

Dawn Primarolo: I assure my hon. Friend that the centres will be able to thrive under the next Labour Government. There is a commitment in obligations to local authorities to make that a comprehensive offer to young children. Unlike the Conservatives, we are not proposing to make any cuts at all to the Sure Start budget.

Angela Watkinson: The failure of the Learning and Skills Council capital funding project for colleges has been well documented. I am particularly concerned about its effect on Havering sixth-form college, which invested £3.4 million of its own money, including £1 million that had to be borrowed, on enabling works. That has had a serious effect on the college's cash-flow stability. In a meeting with the former Minister, now the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Birmingham, Erdington (Mr. Simon), and the college principal, Mr. Paul Wakeling, I understood-

Mr. Speaker: Order. This is becoming an essay. I gently remind the hon. Lady that topical questions must be brief. I think we have the gist of it.

Edward Balls: Very briefly, I expected the hon. Lady to say what good news it was that £42 million had come through for Havering's Building Schools for the Future, but there was no mention of it-maybe she knows what cuts are on the agenda for those schools. As for school college places, we are funding 55,000 more places. More places will be coming through for the hon. Lady and her college, which would not be delivered by the cuts that the shadow Secretary of State is proposing- [ Interruption. ]

Mr. Speaker: Order. I just say to the hon. Member for Wantage (Mr. Vaizey) that I hope Members accept that there is a particular responsibility at questions to the Secretary of State for Children, Schools and Families for hon. and right hon. Members to set a good example.

Karen Buck: As we fast approach the Christmas holidays, a number of secondary school age children in my constituency are still without a school place. I am concerned about the provision that is being made for children who are without a school place for so long, so will my right hon. Friend arrange for someone in the Department to meet me to tell me exactly what the duties of the local education authority are to provide an adequate education for people awaiting a school place?

Edward Balls: I understand those very serious concerns, and we will arrange a meeting as soon as possible to hear them and see where the problem lies.

Andrew Pelling: I was very grateful for the Secretary of State's answer to the first topical question and for the letter that I received from the Minister for Schools and Learners at lunch time about spending in Croydon, because half our emergency primary school places have ended up in temporary classrooms. Why did the Government allow that problem to come into existence? Looking forward to 2011-12 and beyond, will there be money to ensure that primary school places are in permanent buildings?

Vernon Coaker: Of course, the planning for primary school places is a matter for the local authority, and we have sought to deal with the problems that have emerged in some local authorities with those authorities. As the hon. Gentleman will know, we have announced £12.8 million for Croydon to deal with the problem that he mentioned. As he pointed out, Kingston and Croydon, as part of the BSF, will have a further £100 million between them to take these issues forward. As for 2011 onwards, that will be a matter for the next spending review, but I know which party I would rather have in power to take that decision.

Natascha Engel: I should like to ask the Minister for Schools and Learners what he is doing to ensure that children are taught the importance of reducing waste and of recycling throughout their school career. If we are to give future generations a chance, we should not put so much waste into landfill and we should build far fewer incinerators.

Diana Johnson: I am grateful to my hon. Friend for that question. Part of the curriculum review in primary schools will mean that waste, recycling and a general understanding of sustainability will be very much part of what is taught to primary school children. I am happy to have a meeting with my hon. Friend to discuss the issue further and to look at the good practice that already exists in some primary schools.

Mark Lancaster: I have given the Minister advance notice of the concerns of my constituents over the continued uncertainty at the Radcliffe school in Milton Keynes. I understand that he has told Milton Keynes council that he is minded not to award academy status. Can he simply confirm that decision today? If not, will he explain to the parents why he is taking so long to make a decision?

Edward Balls: The position is that no decisions have been made. If the hon. Gentleman would like to make representations, he can do so to me and to the Schools Minister. I am happy to have a meeting so that he can do so. In the end, these matters are for local decision, not for national imposition. I am told that the school in question has seen substantial increases in its results, but it is not too late for the hon. Gentleman to make his representations.

Phil Wilson: Will my right hon. Friend tell me what extra funding will be made available for new schools as part of Building Schools for the Future in the Darlington borough, part of which falls into my constituency?

Vernon Coaker: My hon. Friend will know that Darlington is part of the BSF announcement that we have made today. I understand that Hurworth secondary school is in his constituency and that he, along with many other Members of the House and many of my hon. Friends, has campaigned for that. I congratulate him on that, and I am sure that the school will welcome these developments.

Edward Vaizey: I hope that I can avoid detention and set a good example with this question. Will the Secretary of State help me with a reply to the chair of the governors of one of my local schools? On hearing about the Government's proposal for a legal right to a good education, they wrote that schools are heartily sick of receiving one missive after another missive after another, that such a legal right would add to costs and additional time commitment, and that that kind of thinking was out of touch and completely counter to what was needed. Does the Secretary of State share the sentiments of the chair of governors?

Edward Balls: I do not. I take it from that that the hon. Gentleman will not be supporting our pupil guarantee, which will ensure that every pupil who falls behind will be guaranteed 10 hours' one-to-one tuition in year 7 or in years 3,4 or 5 if they fall behind. In the end, we have to decide whether we want those guarantees to give every child the support they need or whether we want a lottery in education. If the hon. Gentleman's chair of governors wants a lottery, he had better vote Conservative.

Lindsay Hoyle: What consideration has the Secretary of State given to having a full assessment of the asbestos levels in schools, and what can we do to eradicate all asbestos from our schools, and particularly the ones in Chorley?

Diana Johnson: My hon. Friend will be pleased to know that we have been having a series of meetings on this very subject. I recently met the Health and Safety Minister in the House of Lords to discuss it, so it is an ongoing issue. I am happy to have a meeting with my hon. Friend if that would be helpful.

Bernard Jenkin: May I express a degree of surprise that the Secretary of State wrote a letter to the chair of governors of Great Tey primary school on Thursday, asserting that the school has failed to follow its published complaints procedures, on the basis of representations from the parents of only one child and apparently without consulting the local education authority, which is responsible for giving impartial advice? Is he aware that the letter is being used in a public campaign against the school, and was it his intention that it should be used in that way?

Edward Balls: I contacted the school through my officials in September. I pointed out to the school its obligations in law to make sure that a proper complaints procedure was followed when a parent made a complaint. I wrote to the school last week, two months later, to say how much I regretted the fact that it had not had a proper complaints procedure in this case, and I asked the school to reflect again. I hope it will reflect again. If not, I will have to require the school to have a proper complaints procedure. It is important that it does, because in this case there are some substantial concerns about the treatment of that child, which are not being properly addressed by the school and by the governors.

Fiona Mactaggart: I was very pleased to hear the Secretary of State announce an increase of £100 million in the funds for extra primary school places, but our difficulty will be to deliver those fast enough. Will he allow Slough borough council to create community primary schools, rather than insisting that new schools must be foundation schools or other forms of school through a competition, so that we can do it fast enough?

Vernon Coaker: I thank my hon. Friend for her comments about the money announced today for Slough for primary school places. The extra £9 million will be worth while in Slough, and I know that she has campaigned long and hard for that. On the provision of a primary school, we are looking at how we can ensure that Slough can quickly deliver the primary school that it needs.

Philip Davies: Further to the excellent question from my hon. Friend the Member for Aldershot (Mr. Howarth), the Government like throwing money at divisive and politically correct projects such as Black History month. May I urge the Secretary of State to scrap that kind of initiative and direct the funding at a unifying programme promoting pride in British history?

Edward Balls: I am not sure how to respond to that question and stay within the bounds of acceptable parliamentary language. All I can say is that I attended a reception for Black History month in the House of Commons just a few weeks ago. I heard the testimonies of young people from different races and different ethnicities, all saying that by working together, respecting diversity and having unity in our country, we can combat extremism. That is the right way to proceed. Black History month is the right way to proceed. I ask the hon. Gentleman to reflect on those comments, which do him no justice, nor the Conservative party.

Afghanistan and Pakistan

Gordon Brown: With permission, let me begin this statement on Afghanistan by once more paying tribute to our armed forces. Since 2001, our forces have been fighting in Afghanistan one of the longest military campaigns of recent times-longer, indeed, than the world wars of the last century-as part of our century's fight against global terrorism.
	At all times our armed forces have shown the highest professionalism, dedication and courage, which make them the best and most admired in the world. They have endured heavy and tragic casualties. They deserve our utmost gratitude. Let me acknowledge the presence today, as visitors to the House, of members of 19 Light Brigade who have served with distinction in Afghanistan.
	Decisions to extend military action are as critical as those that commence military action. There are two prior questions that people ask of our mission with our American and coalition allies in Afghanistan: one about the present, one about the future. Rightly, both questions have to be answered. The first is why today our armed forces are in Afghanistan, and the second is how and when Afghanistan can take responsibility for its own security so that our troops can come home.
	The origins of our intervention in Afghanistan and the scale of the terrorist threat are known to us all. Around the world thousands of men and women of all religions, including thousands of the Muslim faith, have been murdered in al-Qaeda outrages. The London 7 July bombings cost 52 lives and injured more than 750 people. More recently in Britain, we have seen the 2006 Heathrow liquid bombs plot, the 2007 London and Glasgow bombings, and then this year an al-Qaeda-inspired conspiracy to target shopping centres. There are now over 120 convicted terrorists serving sentences in British prisons, and the security services report to me weekly on the hundreds of would-be terrorists who seek to operate within and target our country.
	To counter that terrorist threat, we have, since 2001, trebled the resources available to our intelligence services and more than doubled the number of operatives. Today, almost twice as many regular police officers are engaged in full-time work to counter the terrorist threat. Suspect travellers are now checked at the border in real time against watch lists; an increasing number of people are excluded on national security grounds from Britain; and, because this is a fight for hearts and minds against violent extremism and those ideologies that would pervert the true Islamic faith, we have stepped up our work with our allies both to expose the damage that murderous and extremist ideologies do and to support those working across all faiths to uphold the common ground of dignity tolerance and respect for all.
	So, our security in the United Kingdom and our effort to counteract terrorist propaganda have been, and continue to be, strengthened at all levels. Faced with the terrorist threat, some have argued that the most effective strategy is simply to defend Britain within our own borders-a fortress Britain; and some ask why British troops are in Afghanistan at all, if al-Qaeda can organise in Britain, in Somalia, in Yemen, in other places and, even, in internet chat rooms in every part of the world. But, as long as the Afghan-Pakistani border areas are the location of choice for al-Qaeda and the epicentre of global terrorism, it is the Government's judgment that we must address the terrorist threat at its source. Indeed, as long as three quarters of the most serious terrorist plots against Britain have links to those Pakistani-Afghan border areas, we would be failing in our duty if we did not work with our allies to deal with the problem where it starts. A more stable and secure Afghanistan and Pakistan will help to ensure a safer Britain.
	Since 2001, progress has been made in driving al-Qaeda into the mountains of Waziristan. Today, for the first time since 2001, tens of thousands of Pakistani troops are in Waziristan, and, with President Obama, I have been urging Pakistan's leadership, most recently in a conversation with President Zardari on Saturday, to step up its efforts not just against the Pakistani Taliban in that region but against al-Qaeda. So, as an international community, we must intensify our support for the action of the Pakistani authorities, improve co-operation with Pakistan in the months ahead and press ahead with a development programme, amounting to two thirds of a billion pounds over four years, which is focused increasingly on the border areas and on encouraging the development of schools to counter the propaganda of the madrassahs. It is essential that progress in driving al-Qaeda from Afghanistan be matched by actions not simply to isolate but to defeat al-Qaeda within Pakistan.
	Success in driving al-Qaeda into Waziristan has led some to propose that it is now sufficient simply to target al-Qaeda there. To explain why that is an inadequate response, we must understand the al-Qaeda network, its long-standing links with the Afghan Taliban and the extent to which al-Qaeda continues to seek, as in the past, a Taliban-controlled, permissive Afghanistan that would allow it unfettered opportunities to plan and launch with impunity its attacks on Britain and other countries.
	So, our task is to prevent the Taliban from giving al-Qaeda that safe haven. Stabilising Afghanistan will not solve all our challenges in Pakistan and elsewhere, but instability in Afghanistan can only increase the risk of conflagration where the rest of the world can least afford it. That is why the safety of people on the streets of Britain requires us to deny al-Qaeda the space to operate across Pakistan and the option of returning to operate in Afghanistan.
	That is the considered view of the 43-nation coalition, a unique force of NATO and non-NATO members led by the United States of America and supported by clear United Nations resolutions. Today our purpose is the same as in 2001: to deny al-Qaeda space to operate. But our approach to achieving that has now to be different. In December 2007, our Government became one of the first to suggest that Afghanistan must be prepared to take far greater control of its own security. Since then, we have consistently argued that to weaken the Taliban we have to strengthen the Afghan Government nationally and locally.
	This approach is built on our knowledge that the Taliban have only minority support among the Afghan people and our judgment that the long-term security of Afghanistan is best secured by training the Afghan army and police, by building up civilian government at a local as well as national level, and through economic development giving Afghans a stake in their future. This has to be supported, as we propose, by stronger international civilian leadership to work alongside General McChrystal to deliver the civilian aspects of this strategy. It is an outline programme for the transfer of lead security responsibilities to the Afghans-district by district, province by province-with the first districts and provinces potentially being handed over during next year. Let us be clear that this process will depend on the Afghans being ready to take responsibility and control: first, through more trained Afghan troops; secondly, through better policing; thirdly, through effective local and national Government; and fourthly, by giving Afghans, as I said, a stronger stake in their economic future.
	I can also say that over time our objective is to work for and to encourage a new set of relationships between Afghanistan and its neighbours based on their guarantee of non-interference in Afghanistan's future affairs and on a commitment to fostering not only its long-term economic and cultural links with other powers in the region but immediate confidence-building security measures from which all can benefit. So I want the London conference on Afghanistan to be held on 28 January, which President Karzai and the Secretary-General of the United Nations have confirmed they will attend, to unite the international community behind a programme now and for the longer term to help the Afghans to secure and govern their own country.
	Against this background, our coalition military strategy is essentially to create the space for an effective political strategy to work, weakening the Taliban by strengthening Afghanistan itself: a military surge, yes, but complemented by a political surge that is, most of all, an Afghan surge. Today I want to set out the benchmarks for this approach and then, and in that context, to give details of the numbers and deployments of our armed forces.
	First, over the coming year, the coalition seeks a major expansion of the Afghan army from 90,000 to 134,000. We expect this surge in recruitment to allow an extra 10,000 troops to be deployed in Helmand, of which 5,000 will be trained and partnered by British forces. And we can start now. Six hundred Afghan soldiers are arriving in Helmand this month-an extra company for each Afghan battalion there. A further 10 Afghan companies-1,000 more troops-will soon reinforce the Afghan army's 205 Corps across southern Afghanistan. Increasingly, therefore, it will be Afghan forces that clear and hold ground as they prepare for the time when they can assume responsibility for their own security.
	Secondly, within the next six months, the international community will agree with President Karzai's Government a police reform plan. We have agreed that, in Helmand, Afghan police numbers will increase immediately to 4,100, with further increases to follow. By mid-2010, the capacity of the Helmand police training centre that we have established in Lashkar Gar will be doubled, and we will double the numbers of police trainers provided by the Royal Military Police from 100 this year to 200 next year.
	Thirdly, there needs to be an effective and accountable local administration. Over the next nine months, President Karzai will be expected to implement, with our support and that of our international partners, far-reaching reforms to ensure that from now on all 400 provinces and districts have a governor appointed on merit, free from corruption with clearly defined roles, skills and resources. District community shuras have been formed in Nad Ali, in Garmsir, in Gereshk and in Nawa, with more to come. Nationwide, the number of community development councils will increase within two years from 22,000 to 31,000.
	Fourthly, there should be a clean, effective and inclusive national Government in Kabul-one that reaches out to political leaders and citizens from all strands of Afghan society. While President Karzai has agreed with us on the priority of tackling corruption with a new anti-corruption taskforce-and last week the arrest of 12 leading officials took place-we recognise that the test is not initiatives but delivery on the ground, and we will monitor carefully what President Karzai's Administration are doing.
	We support President Karzai's call for a Loya Jirga and for reconciliation. It is the task of military forces-international and Afghan-to weaken and pressurise the insurgency, but it is right and essential that this work is combined with the offer of a way forward for those prepared to renounce violence and to choose to join the political process. Reintegration can only be led, and must be led, by Afghans themselves at both national and local levels.
	For Afghanistan to enjoy stability in the future, farmers and working people in towns and villages must have a greater stake in that economic future: a major Afghan-led programme backed by significant funding to identify the likely growth areas in the Afghan economy, and to provide Afghans with credible economic alternatives to the poppy and the insurgency. With 20 per cent. more land growing wheat, this year's wheat harvest is expected to be the highest in 30 years. Programmes funded by our development Department will this year create 20,000 jobs in this area, and by 2013 will be able to raise the incomes of 200,000 people.
	I turn now to the details of our force levels and our deployments. In my statement to the House on 14 October, I said that to support our strategy of Afghanisation-and particularly to train more Afghan soldiers and police, while at the same time maintaining the security of our forces-the Government had agreed in principle a new force level of 9,500, to be implemented once three conditions were met. I can report on each of these conditions.
	First, I made it clear that we would increase the number of British personnel in Afghanistan only if we were assured that it would continue to be the case that every soldier and unit deployed is fully equipped for the operations they are asked to undertake. At this morning's meeting of our Afghanistan and Pakistan national security committee, the Chief of the Defence Staff gave that assurance-that this condition has been met both for the existing force and the additional 500 troops. Indeed, the chiefs report to me the continuing delivery of new equipment. Newly arrived Merlin helicopters have today been given the green light for operations in Afghanistan, a month ahead of schedule. Compared with three years ago, we have doubled helicopter flying hours; in the coming months, these will increase by a further 20 per cent.
	By the end of the year, the number of heavily armoured, mine-resistant Mastiff vehicles will have almost doubled compared with August. The number of Ridgback-a smaller, more agile version of the Mastiff-will have increased by over 75 per cent. By spring next year, they will be joined by more Mastiffs adapted for explosive disposal work and new Warthog tracked vehicles, showing the results of our investment over the last three years of more than £1 billion from the Treasury reserve in vehicles for Afghanistan. By the end of this year also, the build-up of a 200-strong counter-improvised explosive device task force, along with the dedicated equipment necessary, will be complete. In addition, aerial surveillance hours available to commanders have increased by over 40 per cent., and a further 200 specialist troops will be deployed against IEDs by spring 2010.
	Three years ago, equipment and support for our forces deployed to Afghanistan, funded from the Treasury reserve, was estimated at around £190,000 supporting each individual there. This year it is more than double that-around £400,000 and still rising-and the best possible support and equipment is what we owe those who are fighting for our country in Afghanistan.
	I said, secondly, that our contribution of 9,500 must be part of an agreed approach across the international coalition, with all countries bearing their share-a coalition whose principal member and largest troop contributor is of course the United States of America, and we continue regular discussions with the President and his team about the coalition's evolving strategy. America, as everyone knows, will make an announcement tomorrow, and the Secretary-General of NATO-I pay tribute to his work-reports that, in addition to the UK and the USA, eight countries have already made offers of additional troops and that other countries are likely to follow.
	It is often said that America and Britain are fighting alone. This is wrong: excluding America and Britain, the numbers of international coalition troops will have risen from 16,000 in January 2007 to around 30,000 soon, and I believe that over the coming months even more countries will respond. Our effort in Helmand will benefit. Last year, total international force levels in the province were around 7,000; now they will be above 20,000-three times what they were.
	Our third condition for deploying additional British troops was that the military effort of the international coalition must be matched by Afghan effort. President Karzai and his Defence Minister have assured us not only that 5,000 members of the new Afghan national army corps will be deployed to Helmand to be partnered by British troops during 2010, but that additional recruits will arrive for training in the next few weeks.
	So with the three conditions now met, I can confirm that we will move to a new force level of 9,500; that the extra troops will deploy in early December to thicken the UK troop presence in central Helmand; and that from late January they will make the transition to the partnering role that we envisage for them. For understandable reasons of operational security, we shall continue to withhold information about their deployment and the nature of activities of our special forces, but at this time of increasing international effort, it is right to give a more comprehensive account of our total military commitment to the Afghanistan campaign. I believe that the British people have a right to know, and deserve the assurance, that our highly professional, widely respected and extraordinarily brave special forces are playing their full role not only in force protection but in taking the fight directly to the Taliban, working in theatre alongside our regular forces. I want the whole country to pay tribute to their work.
	Taking into account those special forces, their supporting troops and the increases announced today, our total military effort in Afghanistan will be in excess of 10,000 troops. That force level enables us to deliver our military strategy of bringing security to the population. It will support our political strategy of strengthening the Afghan Government at national and local level, as they in return take steps to govern in a clearer, more effective and more inclusive way. It will accelerate the development of the Afghan army and police, so that in time they can take over responsibility for security and thus ensure that our troops can come home.
	We are ensuring as best we can the safety of our forces, and we are today setting benchmarks for Afghanistan to meet. In the past few months, we have worked hard to achieve a stronger military presence across the coalition, with a more equal sharing of the burden, and in all we do we will never forget this fundamental truth of the military campaign: that keeping the streets of our country free from terrorism is our utmost responsibility, and that for a safe Britain, we need a stable Afghanistan. I commend this statement to the House.

David Cameron: I thank the Prime Minister for his statement, but before turning to Afghanistan, may I start by putting right something I got wrong last week? Although the two Islamic schools I mentioned got Government money while being run by people linked to the extremist group Hizb ut-Tahrir, and although they did receive that money under a pathfinder scheme, it was not the pathfinder scheme concerned with combating extremism. I am sorry for the error-I believe that when one gets a fact wrong, one should put it right-but I continue to believe that it is wrong that taxpayers' money goes to schools run by extremists.
	In Afghanistan, 235 British service personnel and Ministry of Defence staff have lost their lives and many more have been injured. That is a high price to pay, so first I endorse absolutely what the Prime Minister said about our forces. They are doing an extraordinary job, and they have the admiration and support of our whole country. We also back the reason for being in Afghanistan-that is, to enable Afghans to look after their own security without presenting a danger to the rest of the world. The sooner that happens, the sooner our forces can come home.
	I want to ask the Prime Minister today about three matters: first, the political and military surge; secondly, the conference that is planned for January; and thirdly, the timetable that he has set out for handing over provinces and districts to Afghan control. On the 500 additional British troops, this is the same further deployment that the Prime Minister announced on 14 October, as he said, subject to the three conditions being met. Let me ask a little more about the three conditions. The first was burden sharing among NATO allies. He told the House on 18 November that he was in touch with eight allies about increasing their contribution, and he repeated the figure of eight allies today. Can he tell us which countries have pledged more troops, how many troops there will be in total, when they will be deployed and how many of them will go to Helmand?
	The second condition was to ensure the forces had the necessary equipment. The Prime Minister today tells us that they will have that equipment. I have to say that that is a test set by the Government and then judged by the Government. Although what he said about helicopters is welcome, is it not the case that in pro rata support, the US forces in Helmand have far more helicopters available to them? Is it not also the case that the Merlins, which the Prime Minister mentioned, are unconnected to the 500 troops that we will deploy because the Merlins were ordered a long time previously? It is worth making the point that if the Prime Minister had not personally cut £1.4 billion off the helicopter programme, we would not be in the situation that we are in today.
	The third condition was that additional Afghan forces would deploy to Helmand. The Prime Minister helpfully gave us the figures today. Will he assure us that they will remain in Helmand once deployed? Is it still the case, as was reported to me, that fewer than 10 per cent. of Afghan forces are in Helmand province, even though almost half the fighting in Afghanistan takes place there?
	The Prime Minister has set out some clear benchmarks for the Karzai Government. Why are we setting out such conditions only now, three and a half years after our forces arrived in Helmand? On the detail, is it really credible to deal with corruption in the police in the Prime Minister's six-month timetable when we have not managed it in the past three and a half years?
	On what the Prime Minister said about appointing provincial governors, since my understanding is that most are already in place, what exactly does he mean by that pledge? Does he mean that some current governors must be replaced?
	Let us consider the London conference. The Prime Minister also mentioned the Loya Jirga. Does he now believe that the Bonn settlement got it wrong and that the constitution in Afghanistan is too centralised? We have been pressing for some time for the appointment of a senior international figure to help drive forward the political strategy. Does the Prime Minister believe that that will now happen? Will he take up our suggestion of creating a permanent contact group of Afghanistan's neighbours to help deliver stability?
	On Pakistan, some of the Prime Minister's remarks at the weekend, reported in the press, seem rather different from what he has said in the Chamber in recent weeks. When I asked him in October about Pakistan, he went out of his way to defend the way in which Pakistan was planning to take on al-Qaeda. As he put it, the Pakistan Government were
	planning how to deal with not only the Pakistan Taliban but the Afghan Taliban and al-Qaeda itself.-[ Official Report, 14 October 2009; Vol. 497, c. 305.]
	He described that as encouraging. However, he has now gone out of his way to criticise Pakistan for failing to deal with al-Qaeda. Will he tell us a little more about what has changed in his thinking about the approach?
	There has also been much speculation, following what the Prime Minister said in Trinidad, about timetables for handover. The statement to the House is slightly different from the briefing given to the press at the weekend. He says that he wants the London conference to determine the conditions for transferring provinces and districts to Afghan control. Yet he also said, not to the House, but in Trinidad, that he wants to see at least five provinces transferred to Afghan security lead by the end of 2010, and that he believed that that would be possible for one or two districts in Helmand. How can the Prime Minister be confident of that timetable before the London conference has even met and set the benchmarks? Naturally we all want our troops to come home as soon as possible-as soon as their job is done. However, does the Prime Minister agree that we must never say or do anything that gives the impression to the Taliban that we will not see this through? Nor should we raise any false hope or expectation among the families of British forces that may later be dashed. Can he therefore assure the country and our forces, as we approach the general election, that any suggestion about timetables for handover will be based on a hard-headed assessment of the situation on the ground? Is it not the case that the British public want us to do what is right-not speculate and risk the danger of raising false hopes?

Gordon Brown: First, I want to thank the Leader of the Opposition for his continuing support for the work of our forces in Afghanistan. In spite of the detailed comments that he made on some issues, we should get this in proper perspective. We are fighting terrorism and fighting al-Qaeda in Pakistan, but to do that successfully we must prevent them from having space in Afghanistan. Our plan for Afghanistan is not simply a military strategy-although that is central and fundamental to what we are doing-but a political strategy that, over time, the Afghan people can take more responsibility and more control over their own affairs. I do not think that I could have been clearer in saying that our objectives are not limited by date, but by achievement. The achievement of Afghan control and the ability of the Afghan people to take responsibility for their security is the determining issue in all that. We are making not a time-specific, but a task-specific commitment about what we need to do.
	Let me answer the right hon. Gentleman's questions about the conditions. I said-he probably picked me up wrongly-that eight countries had pledged more troops in Afghanistan and that I expected more countries to do so in the run up to the conference on 28 January next year.

Gerald Howarth: Name them!

Gordon Brown: I also said that President Karzai had promised that 5,000 Afghan forces would be transferred to Helmand to partner with British forces over the coming year. I also said that those recruits were starting to come now into Helmand and would be deployed with British forces in holding ground in the area in the months to come. I have said previously that the imbalance between the numbers of Afghan forces in Helmand and elsewhere has had to be addressed, and this is one way of doing that. In total, 10,000 of the Afghan forces will be trained in Helmand over the next few months.
	The hon. Member for Aldershot (Mr. Howarth) suggested that I should name all the countries concerned, but it is for them to make their own announcements. The Secretary-General of NATO has made it clear to me and others that eight countries have already given him a pledge of additional forces, and that other countries will follow.
	As for our own troops and their equipment, the Chief of the Defence Staff talked this morning about the increase in ground forces in Helmand. He said:
	We have a third more protective patrol vehicles and helicopters have gone up by a third too. We have more than met the remit in quantity and it is also going up in quality. The equipment people are using is the best they have ever had.
	The Leader of the Opposition also asked about the conference on 28 January. It is designed to bring the international community together. I said in my statement-again, he cannot have picked this up-that we wanted a new international co-ordinator to deal with the problems of civilian and military co-operation that have arisen in Afghanistan. I hope that when the UN appointee Mr. Eide is replaced, we will be able to consider in more detail the overall co-ordination of that effort. At the conference in January, we will also want to discuss how the neighbours of Afghanistan can come together to give guarantees about Afghanistan's security and its freedom from interference in the future, and at the same time how to support the economic and social development of the country. That was covered in my statement.
	Other countries may wish to make announcements about troops and force generation in connection with the conference. The issue of constitutional reform, and the possibility of a constitutional reform commission for Afghanistan, may be the subject of remarks that President Karzai may want to make. We also want further agreement on how we can transfer lead security responsibility to the Afghan people. The conference, which all countries involved in Afghanistan will want to consider attending and which will be attended by President Karzai, will be an important milestone in the development of the policy of the international community in co-operation with Afghanistan.
	The Leader of the Opposition also raised issues in connection with Pakistan. It is right that 30,000 Pakistan troops are now in Waziristan and are taking on the Pakistan Taliban, as well as isolating and cornering al-Qaeda. This is an important development. Over the last few months, perhaps the most significant thing that has happened in the region is that the Pakistan Government and all Pakistan authorities, including the opposition parties, have recognised that if they do not take action against the Taliban and al-Qaeda, they themselves will fall victim to terrorism within their own country, as well as allow international terrorism to flourish in Pakistan.
	As I have said in the House on several occasions, it is an important development that Pakistan is now taking action in those areas. It is also necessary, however-as has been made clear by President Obama to the Pakistan authorities, and as I made clear to President Zardari on Saturday-for more action to be taken if al-Qaeda is operating within Pakistan and seeking further space to operate there. It is the duty of the Pakistan authorities to work with all international partners to attempt to isolate and destroy al-Qaeda in Pakistan.
	I do not think that there is any contradiction in what I have said. It is important to recognise what Pakistan has done, but it is important also to recognise that for the past eight years, al-Qaeda has been able to send instructions from Pakistan to the rest of the world and to organise, from Pakistan, terrorist attacks that have affected every continent. That is why we want the Pakistan authorities to act.
	We are providing the additional troops that are necessary, and we are working with a coalition of 43. It is a unique coalition that has never before been assembled, and one that involves NATO and other NATO members in dealing with the terrorist problem. Today we are giving the troops both the equipment and the resources necessary to do the job, and I hope that the whole country will support us in doing so.

Nicholas Clegg: I welcome the Prime Minister's statement, and of course join him in recognising and commending the enormously impressive work and selfless bravery of our armed forces in Afghanistan. I also join him in welcoming the soldiers from 19 Light Brigade and others who are in the House of Commons today.
	It has finally become mainstream to talk about the need for a big shift in our strategy in Afghanistan. When I first questioned the effectiveness of our action there six months ago and called for precisely such a step change, I was told that it was unpatriotic to do so. The Prime Minister's change of tone since then has been dramatic and welcome. Our approach to our mission in Afghanistan has always been simple: we should do it properly or not do it at all. So does the Prime Minister agree that success is not just about troop numbers, and that focusing on troop numbers, as he has done today, to the exclusion of other things is putting the cart before the horse?
	There is no point in sending a single extra soldier unless the strategy that our troops need to succeed in their mission is in place. So why is the Prime Minister making any announcements about troop numbers today, when we will not know until President Obama's announcement tomorrow what the new strategy is and what chances it has of success? I have in the past criticised the Prime Minister for keeping quiet over Afghanistan and failing to speak out in support of our troops and their mission. Has he not now swung a little too far in the opposite direction, seeking to make an announcement on troop numbers before we know whether the things are in place that would allow them to succeed?
	We know from previous successful peacekeeping missions, such as those in the Balkans, that we cannot succeed unless we have the support of all the big regional powers. In Afghanistan that does not mean just Pakistan, China and Russia; it also means Iran, which is now at loggerheads with the west over its unacceptable announcement of 10 new nuclear facilities. Can the Prime Minister tell us how he will find a way to take a tough stance with Iran while seeking to keep it engaged in securing peace in Afghanistan?
	A centrepiece of the Prime Minister's announcement today was his benchmark-setting for President Karzai. What happens if President Karzai does not achieve those benchmarks? What efforts are the Prime Minister and others in the alliance making to develop a plan B of bypassing Karzai's Government in Kabul and instead dealing directly with local and regional government? I am sure that the Prime Minister agrees with me that, given Karzai's record on corruption, we should not hold our breath for him to change, but work on finding ways to succeed without him if he does not.
	Let me turn to what the Prime Minister said about improved equipment for our brave troops, in particular the welcome delivery of new Mastiff, Ridgback and Warthog vehicles. Can he confirm here today that that means that the poorly protected Snatch Land Rovers are no longer being used by any of our troops out on deployment in Afghanistan?
	Finally, let me address the issue of troop deployments by our NATO allies. The Prime Minister himself said that the deployment of any extra British troops would be conditional on other countries sharing the burdens, yet he refuses to tell us today exactly which other countries are sharing that burden. As he has made that a condition, will he now be clear and detailed in setting out what he expects? Which NATO countries are offering troops, when will they arrive in Afghanistan and what will their role be on the ground?
	For several years now, since our troops first stepped into Afghanistan, the Government's strategy has been over-ambitious in aim and under-resourced in practice. I hope that today's announcement and the one that will follow tomorrow from President Obama finally turn the situation around, so that our troops have what they need for success and can come home as soon as possible, with their heads held high.

Gordon Brown: Again, I think that we should concentrate on where we agree. We agree, I believe, that the strategy of moving to greater control by the Afghans themselves over their own security is the right one. We agree that that will require the extra military numbers that we are putting in theatre, but so too are other countries. We agree that that has to be complemented by a political strategy which, as I have argued for quite a long time, has to involve building up the Afghan army and police, strengthening local and national government by freeing it from corruption while at the same time giving people an economic stake in the future. I believe that on all these things, we are agreed.
	As for the commitments that the Afghans themselves must make, it is not possible for us to give them a blank cheque. What we have to insist upon is that the promises they have made about cleaning up the corruption that is obvious in Afghanistan, and their promises about delivering troops that can be trained in theatre with Britain and other coalition allies, are upheld. The test, of course, is not the words that are in addresses and statements; the test is in actual delivery. That is why I have put more force on what has been done in the last few days since President Karzai started his second term than on the statements made before these early days. It is important to recognise that troops are being provided, that an anti-corruption task force is being set up and that people have been arrested. More, of course, has to be done, but we have seen a start to delivery on a number of key issues that we put to President Karzai and demanded he made commitments to.
	As for vehicles in the field, we need some small vehicles as well as the large ones. We have more Mastiff, we have more Ridgback and we now have the Snatch Vixen, which has been upgraded, but I agree with the right hon. Gentleman that we must ensure that all our troops have the best equipment possible. The truth is, as he knows, that we have had to move from a situation of face-to-face conflict with the Taliban to a guerrilla war conducted by Taliban members through the use of explosive devices to damage our morale and also to damage and kill our troops.
	We have had to adjust our tactics to that, with different equipment, with extra work against explosive devices while at the same time bringing more equipment into the field, including unmanned drones to enable us to carry out surveillance where improvised explosive devices are being placed. We have had a great deal of success there, with more than 1,000-probably 1,500-IEDs dismantled as a result of what we have done. Where people suffer or are maimed or killed as a result of IEDs, we have a responsibility to do more. That is why we have increased the amount of equipment now available in the field for those tasks. More engineers will be going into Afghanistan in the next few months, to make sure that our increased number of troops are properly protected.
	I assure the right hon. Gentleman that we take very seriously indeed what he says about equipment and the provision of proper measures for the safety of our troops, but I believe the answer is in the investment we are making, the new helicopters going into the field, the new vehicles going into the field and the special protection against explosive devices.

Mike Gapes: However effective the Karzai Government, with their history of corruption, are in meeting the benchmarks, is not the reality that we are in Afghanistan for our own national security reasons? In that context, the Prime Minister rightly praised the efforts of the Pakistani Government, but how confident is he that the civilian Government in Pakistan have the power to shift the focus of their military and intelligence agencies to combat al-Qaeda, as opposed to their obsession with India?

Gordon Brown: My hon. Friend, who is an expert on these affairs, is absolutely right to draw attention to the importance of Pakistan and to the fact that, as I said, we are in Afghanistan for national security reasons. Because there is a terrorist threat to the people of our country, it is not enough for us to defend ourselves within our own borders. It is important that we try to deal with that terrorist threat at source.
	As far as Pakistan is concerned, I have talked to President Zardari, as I said, and I also keep in touch with the opposition leaders in Pakistan while at the same time talking to the military-as do other members of the Government-and, of course, our armed forces. We can be sure that the Pakistan authorities are aware that they have to deal with the threat posed by the Pakistan Taliban and also by al-Qaeda. We can also be clear that we have to give the Pakistan authorities the support to enable them to do that.
	I think that we must also take a long-term view of Pakistan. Its population will rise dramatically in future years, and the number of young people in the country who are subject to influence by terrorist and extremist groups is large. Given the number of madrassahs that exist in Pakistan's education system, there is a problem with young people being indoctrinated with extremist ideologies.
	The Secretary of State for International Development, who is now in the Chamber, is right to insist that we put resources into education. He and the Foreign Secretary have undertaken a review of Pakistan's education system which is to be led by Professor Michael Barber. They are making a number of proposals that will improve the text books as well as the quality of education available in the schools of Pakistan, to which we are prepared to devote substantial resources to enable Pakistan to have an education system free of the influences of indoctrination. We want to work with Pakistan on a comprehensive strategy.

James Arbuthnot: We can of course ask proper questions about the detail of the statement, and can throw back at the Prime Minister what he said about the importance of producing delivery on the ground rather than just words. Let me say, however, that it is high time that the Prime Minister finally came to take real personal charge of the argument in favour of our presence in Afghanistan, and that he needs to argue in favour of our presence there to help the stability of Pakistan, with its nuclear weapons. Does he agree that his statement constitutes not the end of that argument but the first of many statements to the House?

Gordon Brown: I appreciate what the right hon. Gentleman has said, in his capacity as Chairman of the Defence Committee. I think we all share the view that there is a terrorist threat, and that it must be dealt with at source as well as in our own countries. It is important for us to explain to the general public not just of our country but of other countries what we are doing, and to explain not only why we have a case for being in Afghanistan, but what our strategy is to enable the Afghans gradually to take more control of their own affairs so that our troops can come home. It is our duty not just to put across the case for being in Afghanistan, but to assure people that we have a plan and a strategy that is co-ordinated across NATO; the right hon. Gentleman's help in putting that message across will be much appreciated.

Several hon. Members: rose -

Mr. Deputy Speaker: Order. These are obviously very serious matters, and many Members wish to ask questions. May I ask for one very brief question-and, perhaps, one brief reply as well?

Ronnie Campbell: The Prime Minister's statement was obviously a good one, because we are seeing light at the end of the tunnel. I hope that that light comes earlier rather than later. Can the Prime Minister confirm, however, that there is no truth in the rumour that the Italians are pulling their troops out before Christmas, the Canadians are talking about pulling troops out, the Dutch are going to pull troops out, the Germans are talking about it-although they clock off at 5 anyway-and Poland is having trouble getting its troops in?

Gordon Brown: I cannot confirm all those rumours. It is true that Canada and the Netherlands have made announcements about the time-limited nature of their deployments to Afghanistan, but it is also true that a number of countries are ready to put additional troops into Afghanistan, including NATO members and countries that are not members of NATO. I am satisfied that thousands of additional troops will be provided not just by America and Britain, but by other countries. As I have said, eight countries have already indicated to the Secretary-General of NATO that they have numbers of troops that they are prepared to deploy to Afghanistan. I think it is also true to say that he has had indications from others that they will make announcements soon.

Peter Tapsell: Why has the President of Pakistan just announced that he has given up his personal control of that country's nuclear weapons and transferred them to his Prime Minister, given that we have been assured for years that they are under the control of Pakistan's army, not its politicians?

Gordon Brown: In a democracy, it seems right that politicians make the final decisions.

Laura Moffatt: My right hon. Friend rightly focused on the issue of first-class equipment for our brave troops in Afghanistan. At the recent opening of the £100-million Thales plant in Crawley the Secretary of State for Business, Innovation and Skills and I saw the fantastic work being done there, and how much pride our workers feel in the fact that they are producing first-class equipment for our troops. A lot of this sort of information could be put out to our constituents without putting our troops at risk; if we did that, would that not let the public know that we have confidence in our troops and that we are giving them the very best of equipment, produced in the UK?

Gordon Brown: My hon. Friend is absolutely right: the equipment being produced for our troops, to deal with the new eventuality of the guerrilla warfare being practised by the Taliban, is of a very high quality. I am proud of the British firms that contribute to the equipment orders that are making possible greater security for our forces in Afghanistan. We will continue to upgrade the equipment available to our forces. In addition to the ordinary defence budget, several billion pounds have now been spent on new equipment-whether it be vehicles, helicopters or equipment to deal with IEDs-and some very notable firms, including some in my hon. Friend's constituency, are responsible for the advances we are making in both technology and equipment.

Malcolm Rifkind: Will the Prime Minister undertake to invite Russia, China and India to take part in the London conference? Does he accept that not only would that be appropriate because they face the same international terrorism emanating from Pakistan and Afghanistan as we do, but that their presence would also reassure British public opinion and international opinion that, unlike what happened in Iraq, our presence in Afghanistan has the unanimous support of the United Nations Security Council?

Gordon Brown: The former Foreign Secretary is absolutely right: any permanent settlement that will ensure non-interference by other countries of the region in Afghanistan's affairs will have to include the countries that he mentioned. They will have to be part of the discussions about the relationship between Afghanistan and its neighbours, and they can be part of better security arrangements for Afghanistan. We will announce more information on the specific details of the London conference in due course, but I take on board what the right hon. and learned Gentleman says: there have to be talks with the countries in the region about how they can secure the future of Afghanistan and, of course, build the economic, cultural and social links that are essential if Afghanistan is to be able to control its own affairs.

James Plaskitt: When I was in Helmand this summer, I was able to see for myself the excellent medical facilities that we have at Camp Bastion; the soldiers there were also hugely impressed by them. With the increase in the number of troops being deployed, will the Prime Minister ensure there is a commensurate increase in the in-theatre medical services and the aftercare services back here in the UK?

Gordon Brown: My hon. Friend is absolutely right about the high-quality service-indeed, the superb service-provided by those charged with the health care of the people who are fighting in Afghanistan. I have seen for myself-as he and many other Members have-the facilities at Camp Bastion, so I have seen that that hospital has some of the most modern equipment in the world, and how well its nurses and medical staff care for people who have been wounded or injured, or who are in difficulty as a result of what has happened in-theatre in Afghanistan. Working with the Americans and other parties who share this medical facility, we are determined to improve it at all times. We are also determined to ensure that the facilities at Selly Oak in Birmingham are the best for members of our armed forces who are injured and need recovery, and for rehabilitation we have invested substantially in Headley Court and will continue to do so.

Michael Ancram: The Prime Minister has rightly referred several times today to the need to deal with the terrorist threat at its source. Can he tell the House what proportion of terrorist threats or plots that have been uncovered, disrupted or prevented in the United Kingdom in the last five years have been directly connected with the Afghani Taliban, rather than the Pakistani Taliban?

Gordon Brown: I was talking about al-Qaeda and the threat posed in the United Kingdom by terrorist plots organised by, or in collaboration with, members of al-Qaeda in Pakistan. The evidence is that many of the plots we have had to deal with, including the most recent plots, are inspired by instructions that come from al-Qaeda operatives. There is contact between these al-Qaeda operatives and people in the United Kingdom. My point about the Taliban is this: if al-Qaeda were to have the space to operate in Afghanistan as a result of the Taliban coming back to power in Afghanistan, they would be an even greater danger not only to the region but on the streets of Britain.

Stuart Bell: The Prime Minister mentioned the whole country, and the whole country will be reassured by his statement. Was it not appropriate to remind the House that we are in Afghanistan under United Nations fiat, that 43 nation states are in the coalition and that eight further nations have pledged troops, with others? Would it not be appropriate for the Secretary-General of NATO to announce these pledges as soon as he can, so that we can build upon the confidence from today through to the conference in London on 28 January?

Gordon Brown: My hon. Friend is right: this is a unique venture. It is difficult to look back upon an event where so many countries have come together as part of one coalition, with the leadership of NATO and the United Nations, and are committed to providing additional resources not only to enable the surge in military activity to happen over the next few months, but at the same time to enable a political settlement to be reached. As for naming the countries that have offered troops, it is possible for me to refer to statements made by different leaders in different countries, but I think that the announcements should be made by those leaders themselves. No doubt the Secretary-General of NATO will want to make a comprehensive announcement soon. I am confident, if I may say so, that the 5,000 additional troops that I talked about a few weeks ago as being an important part of the continuing mission will be obtained as a result of the requests being made to other NATO and non-NATO countries.

John Stanley: Will the Prime Minister say what steps he will take to try to persuade the many countries whose forces in Afghanistan are confined, essentially, to a non-combat role to change their policies and be willing to share the combat burden with our forces?

Gordon Brown: The right hon. Gentleman is right to say that there are some countries that, either through their constitution or through their decisions, do not participate in the military fighting in Afghanistan, and do other work. It is important to recognise that we need the help of all countries, and that where countries are willing to make financial contributions, or contributions involving equipment, we should be prepared to accept them-as, for example, with helicopters. Of course the right hon. Gentleman is right to say that we want more people to share the military burden-the fighting on the front line-that has been an essential part of bringing peace to Afghanistan. I agree with him that we would like more countries to contribute with military forces prepared to go to the front line.

Alison Seabeck: My right hon. Friend knows well that Plymouth understands sacrifice; indeed, we are burying another very brave young man this week. However, perhaps I could read to him the words of Lance Corporal Pilgrim Patton of 2nd Battalion The Rifles. He wrote the following in the Plymouth Herald:
	We are making a difference in Afghanistan. My friends didn't die for nothing.
	We should remember that 14 of his comrades did die on the previous tour. He also said that the British Army has
	the best equipment in the world.
	Would my right hon. Friend support Lance Corporal Patton's view?

Gordon Brown: I am very pleased that my hon. Friend has been able to read out a letter from a serving member of our forces. I pay tribute to his work on behalf of the country, and to the work of all the people from Plymouth who have served in our armed forces, as well as people from the rest of the country. It is important to recognise the advances in equipment that have been made in recent years. It is important also to recognise that we have had to change our tactics because of the nature of the Taliban assault. Equally, it is important to recognise, as she said, that we have the best forces in the world, and we are genuinely very proud of everything that they do.

Stewart Hosie: May I thank the Prime Minister for the detail in today's statement, and say that I genuinely hope that the conditions he has set out will be met? He was quoted earlier today as having said:
	What we need is a political push to match the military push we're now agreeing to.
	Given that the United States is engaged in an exhaustive review of strategy, would it not have made more sense to make a statement on the strategy and on our allies' political commitments to this conflict before the statement on deployment that we have heard today?

Gordon Brown: I hope that in looking at the statement, the hon. Gentleman will agree that I have tried to set forward the strategy that we have to pursue. Since December 2007, when I first said that the strategy must be one of giving the Afghan people more control of their own affairs and of, over time and progressively, building up the Afghan army, police, security services and local government, we have tried to pursue that consistent strategy and to persuade our allies to adopt it. It is important, of course, that we allow the deployment of troops to happen as quickly as possible now that decisions have been made across the alliance. It is right that, side by side with the statement of strategy and why we are there, I announced the figures for troop numbers. As I said, the troops will be deployed to Afghanistan within the next few weeks. It is important that we can signal that that way ahead can start. The hon. Gentleman is wrong to suggest that we should have waited longer; it is right to move ahead now.

Gordon Prentice: The Canadians are withdrawing combat forces from Kandahar in 2011. Kandahar, as you know, Mr. Deputy Speaker, is right next door to Helmand. Has my friend spoken to Stephen Harper, the Conservative Prime Minister of Canada, to ask him to reconsider, and what did Mr. Harper say?

Gordon Brown: I spoke to Mr. Harper at the Commonwealth conference and we had a discussion with other countries that were also present, including Australia, which is involved in Afghanistan, and New Zealand. It is my view that in Kandahar and Helmand there will be a greater number of troops next year than there are this year. Although some countries have made difficult decisions that they themselves have the responsibility to take, overall the number of troops in Helmand and Kandahar will rise.

Bob Russell: In a few months, the Afghan national army will be bigger than the British Army. The Prime Minister has mentioned the 43 nations in the coalition, but he must accept that the vast majority of our major European NATO allies have not contributed troops on the ground in southern Afghanistan. May I ask him one specific question, which I believe will be a great help for our servicemen and women? May we have the deployment of more unmanned aerial vehicles-UAVs-to help detect terrorist activities?

Gordon Brown: The hon. Gentleman is right to mention that. I think I mentioned in my statement that the numbers would rise. It is an essential part of our strategy that this surveillance takes place so that we can discover and then dismantle the IEDs that have caused so much damage to our forces. Everybody here knows that 80 per cent. of the deaths that have been caused over the past few months have been caused by IEDs. To track and dismantle them we need unmanned vehicles. We also need military intelligence and engineers in the theatre who are enabled to dismantle these weapons, which have caused so much destruction.
	On the hon. Gentleman's more general point, I believe that we will see additional troops coming from coalition members that are not America or Britain.

Geoffrey Robinson: Is my right hon. Friend aware that his cogent explanation of our purpose in Afghanistan will command widespread understanding? Did I hear him right when I heard him say that the civilian aid programme will now work together with the military effort so that we can have a co-ordinated and unified approach under General McChrystal? Could this not be an opportunity to get around the corruption that at the moment so besets the Karzai regime and is the biggest threat to our being successful in our programme? Could that not be brought together under General McChrystal and delivered direct to the governance in the districts and provinces?

Gordon Brown: I am grateful to my hon. Friend for what he says. It is essential that we tackle corruption in the Afghan Administration. The way to do that is to ensure that moneys that are being spent in Afghanistan are properly accounted for. When money goes to the Afghan Administration for spending within Afghanistan, there is an Afghan reconstruction trust fund that is audited by the World Bank, and we try to ensure that moneys are going for the purposes that are intended.
	My hon. Friend's more general point about the co-ordination of military and civilian work is very important and that is what we want to look at as part of the agenda for the London conference. It is important that as we look at who will succeed the UN special representative in Afghanistan, we try to bring together the military and civilian work in a more co-ordinated way and that we have people in charge of the humanitarian and development work in Afghanistan on a consistent and co-ordinated basis. What my hon. Friend says will definitely be taken into account as we consider what we can achieve as part of the London conference.
	I am pleased to note that members of the armed forces who have served in Afghanistan are now in the Public Gallery of this House. I want, as will the whole House, to thank them for everything that they do in the service of our country.

Ann Winterton: Having campaigned over the last four years for more protected vehicles with V-shaped hulls, I welcome the increased numbers of Mastiffs and Ridgbacks being delivered to theatre. Is the Prime Minister confident that the extra troops being sent to Afghanistan will not have the opposite effect to that which is intended-to exacerbate the situation, as has happened in the past? Could this not be history repeating itself?

Gordon Brown: No, I do not believe so. As I have said, we have had to adjust to a change in tactics by the Taliban. They are fighting what is in effect a guerrilla war and we have to change the techniques we use to deal with them. By having properly protected vehicles, surveillance of IEDs and intelligence backing up the military work of our troops in the field, I believe we are doing the right thing. The necessary surge in numbers in the parts of Afghanistan that have been subject to the greatest violence will be complemented by a political strategy, whereby if we take ground, it will increasingly be Afghan forces who hold the ground. Therefore, far from being seen as an occupying force, by partnering with Afghan forces we shall enable them over time to take security responsibility for their country.

Jeremy Corbyn: Does the Prime Minister accept that a different analysis could be put on this? The vast increase in American troops due tomorrow-apparently-the increase of British troops to more than 10,000 and the demands on other countries look more and more like a colonial occupation, with all the demands that have been placed on the civilian administration in Afghanistan and apparently virtual control of it. Will that not just increase opposition there, in Pakistan and in neighbouring countries? Will it not actually make the situation worse, so that British troops may be there not just for another year, but for another eight years?

Gordon Brown: The question my hon. Friend has to ask himself is whether he believes that the Afghan Taliban, who are responsible for the denial of human rights, particularly to women, have the political support of the people of Afghanistan or not. All the recent evidence we have seen is that only a small minority of the population of Afghanistan support the Taliban. Even part of the insurgency includes people who are mercenaries, who are paid for their work and have no ideological commitment to what the Taliban say. In some cases, nationalists fighting with the Taliban can be detached from them by an effective Afghan Government and the process of reconciliation. If my hon. Friend starts from the proposition that the insurgency has massive support in Afghanistan, he may of course reach the conclusion that it is a mistake for us to work with the elected Afghan Government and the Afghan people to defeat that insurgency, but I start from the proposition that the Taliban have limited support in Afghanistan.

Andrew MacKay: Bearing in mind the fact that in the Prime Minister's last two statements to the House, he has quite rightly stressed the need for all our NATO allies to commit far more troops to Afghanistan and that he has also stressed that he would make great efforts to ensure that would happen, does he understand that it is disappointing and disturbing for many of us that this afternoon he has been forced to be so coy and not reveal any of those extra troops and their countries?

Gordon Brown: I think the right hon. Gentleman is labouring the point. I have announced that eight countries have already agreed with the Secretary-General of NATO that they will provide troops additional to those that they have in Afghanistan. I have also said that the NATO Secretary-General expects more countries to announce that in the next few days. I have already given figures on the doubling of numbers of non-British and non-American troops in Afghanistan over the last two years and more to show that the international coalition is made up not just of Britain and America, but that a vast range of countries contributes to the coalition forces. We should wait and see what the announcements of other countries are before we rush to the conclusion that the right hon. Gentleman has rushed to.

Gisela Stuart: We are probably something less than six months away from a general election and I think our troops deserve to hear the House speak with one voice. Has the Prime Minister considered, therefore, bringing in the leaders of the main Opposition parties to agree on the strategy for Afghanistan to ensure that Afghanistan does not become a party political football?

Gordon Brown: I hope from what has been said today that a message is going to the country that despite our other differences, the leaders of the major political parties in this country are all supportive of the efforts our troops are making in Afghanistan, and that they agree that the strategy moving forward is one whereby Afghanistan itself must take more responsibility for its own affairs, that we must work with Pakistan as well as Afghanistan to deal with the terrorist threat in that region and that although the financial commitment is strenuous, it is right to support our troops and our forces as we are doing.

John Baron: Even with the 500 additional troops, total allied forces, including Afghans, do not exceed the 27,500 troops we had in Northern Ireland at the height of the troubles. Given that Helmand province is four times the size of Northern Ireland and that the ratio of helicopters to troops is far lower than when I served in Northern Ireland, what makes the Prime Minister think that an extra 500 troops will make sufficient difference?

Gordon Brown: Our strategy is not as the hon. Gentleman implies in his question; it is to build up Afghan forces so that they are in a position to take more security responsibility for their country. I am also telling the hon. Gentleman today that although there are 90,000 Afghan troops now, there will be, in our view, 135,000 or so by next year. It is our strategy to train up these Afghan forces so that they, by their professional ability, can hold the ground as well as take ground in Afghanistan over time. That is our strategy-not to rely exclusively on allied forces, but to have allied forces working with the Afghan army and a corruption-free Afghan police over the next few years. So the hon. Gentleman has misunderstood the strategy if he puts it the way he is doing.

Douglas Hogg: May I suggest to the right hon. Gentleman that he should set out his strategy in a fully detailed White Paper to be published by the end of this year and that the White Paper should be debated on the Floor of the House on a votable and amendable motion before 28 January?

Gordon Brown: We did set out-in April, if I remember the date rightly-the proposals that we had for what we called the Afghanisation strategy. We have set that out in detail in the House. Of course, if Members of the House want to debate these things in more detail, it is right that we should do so, but I had understood-perhaps I have been misled-that the official Opposition support our strategy.

Paul Keetch: May I reinforce the comments of my colleague on the Select Committee on Foreign Affairs, the right hon. Member for Tonbridge and Malling (Sir John Stanley), about the role of other forces in Afghanistan? There was consistent criticism by British and US forces when we visited in April that NATO allies on a NATO mission were not playing their full role. Will the Prime Minister assure the House that the new troops going to Afghanistan from NATO and other countries will not be governed by so-called caveats? It is frankly no good having troops who will not fight at weekends, who will not fly at night and who go home at five o'clock.

Gordon Brown: The hon. Gentleman is absolutely right that we expect other countries to do more, but he is also a fair man and he recognises that, over the last few weeks, we have been trying to persuade NATO allies and, indeed, allies outside NATO to do more. But I think we also have got to appreciate that, in the end, we have got to build up the Afghan forces, just as Pakistan has got to have a more professional approach to dealing with terrorism, and that is where the answer to the problems lies in Pakistan and Afghanistan. We can do a great deal and we will have to do more, but, in the end, we want Afghan people themselves to take more responsibility for their own affairs.

Peter Bone: The Chinook helicopter is the workhorse in Afghanistan. Is the Prime Minister actively considering purchasing new Chinooks?

Gordon Brown: If there are any statements to be made about helicopters, they will be made to the House.

Mark Lancaster: Many of the extra EOD-explosive ordnance disposal-engineers the Prime Minister referred to will have to come from the Territorial Army. Now that he has seen the error of his ways and reversed his proposed cut to the TA, will he simply reassure the House that there will be no cuts to its budget next year?

Gordon Brown: I think we have made absolutely clear in the last few days the value we attach to the Territorial Army, given the decisions about money that we have made. But I hope that the hon. Gentleman will also consider that the priority at the moment is the effort in Afghanistan, and directing our resources to Afghanistan means also that we finance the Territorial Army for what it can do in Afghanistan. That is a decision that we have made. I had thought that the Opposition might be more-

Michael Penning: My hon. Friend has served.

Gordon Brown: I am grateful for the fact that the hon. Member for North-East Milton Keynes (Mr. Lancaster) has served and I am grateful to all people who serve in the Territorial Army. It is important to recognise that, but it is also important to recognise that our resources have got to be prioritised towards what we are doing in Afghanistan.

John Redwood: What proportion of Helmand does the British Army currently control, and how much more territory does the Prime Minister want them to win, with or without the help of the Afghan allies?

Gordon Brown: The right hon. Gentleman puts the question in the context of territory. I would prefer to put it in the context of people, and people working with the British Army in the main population centres. Our strategy is to work with the Afghan people in the villages and towns-particularly in the towns-to make sure that they feel comfortable with the Afghan army gradually taking more responsibility, to have an Afghan police force that is more in tune with the needs of the people, and, as I said, to build up the shuras and Afghan local government with good provincial and district governors. That is the strategy that we want to pursue.

Tobias Ellwood: The Prime Minister stated that there are 90,000 trained Afghan troops, but as my right hon. Friend the Leader of the Opposition pointed out, just 10 per cent. of those troops are in Helmand province, yet 50 per cent. of the action-the hostilities-take place there. Surely it is time for more Afghan trained troops to be sent to Helmand province. The Prime Minister stated that there are 5,000 recruits coming. It will take two years to train those troops. Could he call President Karzai and get more Afghan troops down to Helmand now?

Gordon Brown: I think the hon. Gentleman misunderstands what I am saying. First, there are 10,000 troops to be trained for partnering in Afghanistan's Helmand province over the next year, not 5,000. Half of these will be trained by the British, and half of them by the Americans. Some of the troops that will come to Helmand will already have been trained and they will be there for partnering. Some of them will come to be trained from the beginning. The commitment that I have from President Karzai is that he now sees that Helmand is a priority, and that troops will be dispatched from the rest of the country to Helmand where, as the hon. Gentleman rightly says, a great deal of the violence is. It is in recognition of that that I have made today's announcements.

Mark Pritchard: In his statement the Prime Minister mentioned Yemen. He will know that Yemeni nationals form one of the largest groups operating within al-Qaeda, in both Afghanistan and Pakistan. Will the Prime Minister give a commitment that he will continue to work with the Government of Yemen to ensure that it does not become a failed state, and that Government Ministers and officials from Yemen will be invited to the London conference?

Gordon Brown: The hon. Gentleman is right to point to the terrorist threats that we see in different parts of the world. It is true that terrorists operating from Yemen, and in some cases then trained in Pakistan, are people whom we have had to pursue. It is also right that Somalia has become a major centre for the development of terrorist activity and that some of these groups are targeting Britain, but I repeat that the main centre-the epicentre, so to speak-of global terrorism remains Pakistan and the Pakistan-Afghan border. To take on the terrorist threat in Britain, we have to target Pakistan and Afghanistan, and the efforts that we put there into a political as well as military strategy are the most important things we can do. Of course we will not neglect the importance of Yemen and the dangers that I know exist there, but I emphasise that the important centre of global terrorism remains the one that we have been talking about today.

Andrew Pelling: The Prime Minister leads the House in noting the sacrifice given by our soldiers. Sadly, is not this initiative repeating the mistakes of a political generation ago in Vietnam, when people talked about the west being under threat, saying with all good will that we wanted to withdraw, but inevitably getting drawn closer and closer into a conflict that ultimately could not be won?

Gordon Brown: The hon. Gentleman ought to look at the evidence for the support for the Taliban in Afghanistan. His assumption is that somehow the insurgency has massive popular support, and that the vast majority of the population would go with that insurgency if they had the choice. I do not think that that reflects the situation in Afghanistan. A recent poll showed that only 8 per cent. of the population of Afghanistan supported in any way the Taliban and the insurgency. I believe that most Afghan people want security and safety. I believe that they will support the partnering of British and coalition forces with Afghan forces, and that we have the ability to work with the Afghan people to defeat the insurgency. I also believe that there are many people associated with the insurgency who are mercenaries or others who do not share the extremist ideologies of the Taliban or al-Qaeda, and may wish at some point to join the ordinary political process and renounce violence.

Patrick Mercer: Why has it taken the Prime Minister so long to make up his mind to send the extra troops? Commanders in the field have been asking for an extra battle group for at least a year. Why the delay?

Gordon Brown: Last year we had 8,000 troops in Afghanistan, and at the moment we have more than 9,000 troops in Afghanistan, so the idea that we have not increased our forces over the past year in response to events is completely wrong, if I may say so. On the 500 additional troops whom today we have agreed to send, I think that it was right to lay down conditions that had to be met, partly because the public needed to be assured that everything possible had been done to make it clear that the equipment for our forces was the best possible; partly because we had to assure ourselves that other countries would play a part in the effort; and partly because we needed the Afghans themselves, after the election period, to commit to providing the forces that are necessary for training.
	If our strategy is to work, we need the Afghan forces to be trained by British forces and by coalition forces. That is why it was important to get the assurances and, indeed, the practical announcements from President Karzai about the designation of troops to Helmand. I believe that putting conditions on the additional 500 forces personnel was the right thing to do, and I think that the hon. Gentleman is absolutely wrong in saying that we have not acted over the past year. We have done that, and I think that it was absolutely right to lay down conditions that, having been met, mean that we can go ahead immediately and send the additional troops to Afghanistan.

Mr. Deputy Speaker: We must now move on to the next statement, which is on Basildon and Colchester hospital trusts-

Andrew MacKinlay: And Thurrock.

Mr. Deputy Speaker: Order.

Andrew MacKinlay: Basildon and Thurrock.

Mr. Deputy Speaker: Order.

Hospital Trusts (Essex)

Andy Burnham: With permission, Mr. Deputy Speaker, I wish to make a statement on patient safety in the NHS.
	Last week, the two regulatory bodies took action in respect of two NHS foundation trusts, Basildon and Thurrock University Hospitals NHS Foundation Trust and Colchester Hospital University NHS Foundation Trust, and I wish to update the House on that. Separately, questions have been raised about safety standards at other NHS and foundation trusts. I wish to answer those directly and inform the House of the further steps that the Government are taking to improve regulation and safety standards in the NHS.
	First, let me set out some important points of context. In 1999, the Government established an independent regulator for the NHS. In tandem, the Department of Health has sought to shine a spotlight on patient safety in the NHS over the past decade by encouraging the systematic publication, analysis and comparison of a range of clinical data. That followed the Kennedy inquiry into events at Bristol. That drive has brought more transparency and a greater focus on safety standards.
	At all times, patient safety is our overriding concern, and there are signs of significant progress in the NHS as a whole. Overall, there was a 7 per cent. reduction in the hospital mortality rate in England last year. However, there is never any room for complacency, and patient safety must be the subject of a continuous process of improvement. There is still considerable variation in standards throughout the NHS, from one hospital to another, and in some cases the variation is unacceptably wide. That is the case in respect of Basildon and Thurrock University Hospitals NHS Foundation Trust.
	A year ago, surveillance of data by regulators identified a high hospital standardised mortality ratio at the trust. Since then, the regulators have worked with the trust on a detailed improvement plan. That focus had brought improvements, and over the course of this year the HSMR has fallen. However, following unannounced inspections, the Care Quality Commission has raised further concerns with the foundation trust regulator, Monitor, about care standards and the rate of improvement. They agreed that progress was not sufficient, and it was felt that the trust was unable to deliver the improvements necessary within an acceptable time scale.
	A decision was therefore taken to intervene and use formal powers by installing new clinical leadership at the trust. Two senior professionals from high-performing trusts will provide experienced medical and nursing support to ensure the early implementation of agreed clinical and nursing changes. A programme delivery office has also been established to oversee delivery. I can assure the House that, as a result of this action, I expect to see immediate improvements and will provide regular updates on progress.
	Monitor has also taken action in recent days in respect of Colchester Hospital University NHS Foundation Trust. Last Friday, the regulator used its statutory powers to remove the chairman of the trust. Monitor had, over a period of time, raised a series of concerns with the trust in relation to performance and governance. It has concluded that those have not been adequately addressed and decided that new leadership is necessary to bring the improvements that patients have a right to expect.
	I wish to make it clear to the House that the CQC has informed me that no similar action is necessary at any other trust at this stage. As part of regular monitoring, however, it has identified a small number of other trusts where action is needed to address concerns, and over the weekend there has been further analysis of safety in the NHS. Twelve NHS and foundation trusts have been claimed to be significantly under-performing in relation to safety, and a number have a high hospital standardised mortality ratio. While I welcome the shining of a spotlight on to safety standards, it is important to place this finding in context. Given that deaths in hospital have reduced overall-by 7 per cent.-it is possible that the trusts with a high rate are not showing the same level of improvement as the rest. That said, it is vital that these questions are investigated and answered.
	It is also important to point out that the report by Dr. Foster analysed a more limited set of clinical and quality data than the CQC. The CQC therefore provides the authoritative voice on these issues, and takes a wider view. The report highlights a number of trusts where there have been issues, but many had already identified them and have action in hand. I can assure the House, however, that where legitimate concerns have been identified, they will be followed up. Again, I will provide updates as and where necessary.
	Patient safety must at all times be the highest priority for my Department, the national health service and every single hospital in the country. I expect every trust in England to investigate all serious incidents and unexpected deaths and report them to the national reporting and learning system. This will be mandatory as part of new registration requirements. Following events at Mid-Staffordshire hospital, hospital standardised mortality ratios for all hospitals in England have been published on NHS Choices since April 2009. From next April, the CQC will introduce a stronger inspection regime that provides an in-depth analysis of trust performance in real time. This will also be available online for the public to inspect.
	However, as a result of concerns expressed, I have asked the Department to speed up the implementation of this new system and will bring it in from January. Already, 90 per cent. of CQC inspections are unannounced. I wish to see this at least maintained in any new system, with more unannounced visits at trusts giving cause for concern. All trusts will soon be required to screen for MRSA when admitting patients through accident and emergency. Many already do, but I am asking the Department to speed up 100 per cent. adoption. I will also shortly bring forward plans to link hospital payment more closely to safety and quality.
	Lord Darzi's next stage review made it the mission of the NHS to focus relentlessly on safety and quality. All trusts must constantly review performance and, where necessary, raise their game. Progress has been made, but where it is not quick or good enough we will always say so and act swiftly. I commend the statement to the House.

Andrew Lansley: I am sure that the House is grateful to the Secretary of State for making a statement about these two interventions at NHS foundation trusts, notwithstanding the fact that he is not directly responsible for what happens in those trusts. However, if he is going to take some responsibility, can he explain what he did on or after 4 November, when the inspection report into the prevention and control of infections at Basildon and Thurrock was published on the CQC website, including many of the findings that have subsequently caused so much distress to the patients and public around Basildon and Thurrock? Was Thursday's press release about the intervention by Monitor merely a sacrificial lamb ahead of the Dr. Foster report?
	Now that the taskforce has gone into the Basildon and Thurrock trust, does the Secretary of State agree that it is vital that, within days, it advises Monitor on whether the trust has, or does not have, the necessary leadership, clinical and otherwise, to take it forward for the future?
	Earlier this month, Monitor made it clear that it was considering intervention at Colchester because the trust appeared to have breached the terms of its authorisation. Did the Secretary of State have any correspondence with Monitor about that, and did he have a view about it at the time?
	In his statement today, the Secretary of State seems to have been talking almost interchangeably about the CQC and Monitor, but it will be evident to many, as it was to me, that they were not speaking from the same page in relation to Basildon last Thursday and Friday. Will the Secretary of State, like me, make it clear to the CQC and Monitor that the relationship between those two regulators will have to be closer and more harmonious than it has been in the past if it is to work effectively?
	The Secretary of State's statement centred on two individual trusts, but the repercussions will be felt across the country, not least because of the worrying data in the Dr. Foster report, none of which should come as any surprise to the Secretary of State. However, instead of listening to the messages in the report, the Government set out over the weekend to shoot the messengers. They are quite wrong to do so, and that will not restore public confidence.
	What is required, I am afraid, is evidence that the Government learn from the lessons of these serial failings. Why do I literally have to stand at this Dispatch Box again responding to issues very similar to those we saw at Maidstone and Stafford? Ministers each time call it an isolated case; each time they say, We mustn't be complacent and it must never again happen; but each time they fail to tackle the heart of the problem.
	We know that the NHS is capable of delivering some of the best health care in the world; we know that some hospitals-such as my own, Addenbrooke's, in Cambridge-are among the best in the country and do remarkably well. However, to understand why some hospitals do not deliver acceptable standards, we just have to look at the lessons of the recent past: Stoke Mandeville, 2006; Maidstone, 2007; Mid Staffs, March this year; today, Basildon and Thurrock trust. Recurrent themes have occurred in each of those hospitals: waiting time targets prioritised over patient care; clinical priorities distorted by Government targets; a focus on financial issues at the expense of patient care; senior management at board and strategic health authority level prioritising national targets and policy objectives over the delivery of quality care for patients; primary care trusts focused on the cost and volume of treatments, rather than performance management of the quality of care for their public; and a lack of leadership and accountability, with front-line staff finding that the concerns they have raised are not being listened to.
	When will the Secretary of State acknowledge that the Government must do something about this, and in particular scrap the top-down process targets that divert attention away from patient care towards tick-box questionnaires? It is clear that, where the regulatory system is concerned, the Government will have to abandon the health check published by the CQC last month. Will the Secretary of State agree that he should do so and instead have a rating system that actually relates to what patients experience in hospital and the results of the treatment they receive; that is based on outcomes, not processes; that has more on-the-spot inspections; that is based on patient experience and their reports of their outcomes; and that follows up unresolved complaints?
	Another reform is to give patients and the public the power to influence how care is provided in the NHS. The Government scrapped community health councils and have never since allowed there to be an effective patient voice in the local community. Will the Secretary of State ensure legal protection for staff who blow the whistle on failings in their trusts, and that the NHS adopts, as it must, a no-blame culture in which the penalty is for the cover-up, not the error?
	The public need to be assured that the Government are doing all that can be done to ensure the safety of patients in our hospitals, but today, how can they be? We have conflicting analyses from Dr. Foster and the CQC. We have Ministers out of their depth and in denial. We have an NHS that has the capacity to deliver the best, but with neither the incentives nor the leadership in place to make it happen. What did we get from the Secretary of State? We got processes, rather than purpose, and another statement that this must never happen again. It is just not good enough.

Andy Burnham: I will deal with the hon. Gentleman's questions in turn, but let me deal first with his last point. I think he was accusing us of complacency, or of failing to address directly the issues that matter to patients. Ever since coming into this job, I have said that I do not want to over-claim for the NHS. Where it is good we should say so, but where there needs to be improvement, we will not flinch from taking the action necessary to get it.
	It is important for the hon. Gentleman to acknowledge that the data on which the judgments in question are being made have been encouraged by this Government, following some of the events that he mentioned. The culture of challenge and analysis of clinical data has been at the heart of our plans for improving the NHS, which is why what he said was unfair and misdirected. It was this Government who asked the regulators to use the HSMR data to ensure that there was challenge. Because the Healthcare Commission, the predecessor to the CQC, was looking at those data, it was able to take the action that it did in relation to Mid Staffordshire.
	I will always accept hearing from the hon. Gentleman that we can do more and should not be complacent, but I point out to him that there is no complacency. We have made changes, and thinking back to what was in place before, I do not believe that it was possible to make judgments about the clinical standard and safety of care across the NHS, as it is today.
	I shall deal with some of the hon. Gentleman's specific points. He particularly asked me about 4 November, when the report was submitted by the CQC. He has to accept that, as I said in my statement, the matter goes back further than that. Because of the system of regulation that we have, and because there is routine monitoring of data, action had been taken much earlier and the two regulators had been in contact about Basildon and Thurrock NHS foundation trust. Action was in hand and a plan had been developed, and it was because the regulators felt that progress against that plan had not been sufficiently swift that they decided to escalate their involvement. It is not fair of the hon. Gentleman to say that there was a knee-jerk response, because there had been a long process in place that had failed to produce the necessary improvements, and an unannounced visit by the CQC in October highlighted some of the concerns that then required the escalation.
	On Colchester, the hon. Gentleman will know that Monitor has been expressing concerns about standards for some time and has been in dialogue with the trust. I support the regulator, in this case Monitor, in taking the action that it believes is necessary to improve standards for patients quickly. I shall make no apology for that.
	The hon. Gentleman mentioned the relationship between the CQC and Monitor, and I agree that there needs to be close co-operation between the two regulators. I accept that there were lessons to be learned following the events at Mid Staffordshire about how that relationship could be improved, and I accept that he is right to say so, but there has been close co-operation on Basildon and Thurrock, and that has led to the action that I have described.
	On Dr. Foster, the hon. Gentleman asked, Why shoot the messenger?, but I do not believe that the Government did that. As I said, we have encouraged the publication of the relevant data across the NHS. He needs to take a step back, if he does not mind my saying so, because the patient safety rating in this case is disputed by some of the trusts in question. He will have seen yesterday that some of them issued a pretty strong rebuttal to the concerns raised, and that is all part of the process of challenge. We did not dismiss the Dr. Foster findings; indeed, it was on the back of those concerns that I asked to be assured that no action similar to that taken at Basildon and Colchester needed to be taken against any other NHS trust. I received that assurance from the chair of the CQC over the weekend.
	As he always does, the hon. Gentleman made a big criticism of Government targets and suggested that they run counter to improving patient safety in the NHS. The best hospitals are meeting performance standards targets that matter to patients and financial targets, and providing high-quality, safe care.
	Is the hon. Gentleman really saying that A and E departments were safer before the introduction of the four-hour target? I am not sure that he wants to make that claim. I remind him-it almost seems to have slipped his memory and that of his colleagues-that the patients charter circa 1995 included a four-hour A and E standard, and a proposal to reduce that target to two hours once it had been embedded. I do not therefore believe that it is possible for Conservative Members to stand at the Dispatch Box and claim that setting such targets is the wrong thing to do.
	The hon. Gentleman mentioned the need for patient feedback and I agree that there is a need for better feedback from patients about the standards of care that they receive. That is why we introduced NHS Choices, with the ability for patients to put their comments online. However, I agree about the need for better patient satisfaction data, service by service, throughout the NHS. I have said that I want that published systematically, and a new link to payment for hospital services.
	I assure the hon. Gentleman that there is legal underpinning for whistleblowing throughout the system, and we should all do what we can to support staff who want to raise concerns about standards in their workplace.

Norman Lamb: I thank the Secretary of State for sight of the statement before he came to the House.
	It is important to acknowledge the fine work and standard of care across most of the NHS. Indeed, there will be many fine clinicians doing important work in the hospitals that we are discussing, so it is important not to tar everyone with the same brush.
	However, the revelations raise serious concerns. For example, a taskforce has been sent into Basildon, but will we get to the bottom of how the failures occurred in both hospitals so that we understand who was responsible? What about the clinicians? Each has a duty to their patients. Will they be held to account for any failures? What about the people on the board who have responsibility for patient safety? Will they be held to account?
	The CQC says that there is no evidence of another trust's being in the same category as Basildon and the Secretary of State repeated that assurance. Yet that is precisely what we were told in the aftermath of Mid Staffordshire-that it was an isolated incident. How can we have faith in the CQC's standards given what happened with Mid Staffordshire?
	Are Dr. Foster's concerns being thoroughly investigated, particularly the extraordinary statistic that 39 per cent. of hospitals have failed to investigate all unexpected deaths or cases of serious harm? Surely every case must be thoroughly investigated.
	There is now a series of cases in which there is an extraordinary mismatch between rating and the reality: Mid Staffordshire, baby P, Basildon; and eight of the 12 cases that Dr. Foster raised were rated good or excellent. Does not that completely undermine confidence in the system of regulation? Do not we end up with a state of paper safety, but not real patient safety?
	The Secretary of State will know about the NHS Confederation report What's it all for?, which is a damning critique of the system of regulation in this country. It highlights that more than 60 bodies inspect hospitals, with no clinical engagement in responding to all those organisations. One person would take 491 years to provide all the data to the national regulators. What has happened to that report? Are the Government ignoring it or acting on it? If they are acting on it, how are they doing that? The report highlights that several bodies nationally are responsible in some way for patient safety: the CQC, Monitor, the National Patient Safety Agency, the Health and Safety Executive. Who is ultimately responsible? Is there not a danger that no one ends up being accountable?
	We hear that Monitor has a list of 11 NHS foundation trusts where there has been a significant breach of standards, which it is investigating. The CQC is investigating a few hospitals. Dr. Foster has concerns about 12 hospitals. Are they all the same hospitals? Are the different bodies talking to each other? Have the local primary care trusts been informed in every case? Do not the public have a right to know which those hospitals are?
	Does the Secretary of State agree that ultimately openness and full information are more effective at driving up standards than tick-box self-assessment, without clinical engagement? Does he agree that it is hard to justify the increase in the pay of the chief executives at Basildon and Colchester by 15 per cent. and 11 per cent. to £150,000 when serious concerns were being raised about standards?
	Given the accumulation of evidence and the fact that hundreds of people appear to have lost their lives unnecessarily, is not there a case for an independent investigation of regulation to consider its role, self-assessment, the lack of clinical engagement in providing data to the regulators, the role of targets-yes, they must be investigated-and that of financial incentives? Do we not owe it to all those who have been affected by the scandals?

Andy Burnham: We certainly owe it to every patient in the country to take these matters with the greatest seriousness, and that is of course what we will do.
	The hon. Gentleman made some sweeping statements about the numbers of deaths. It is important to say that the hospital standardised mortality ratio is a trigger for investigation, but I would caution him against thinking that in and of itself it gives a verdict on hospital performance. It is very important-and only fair to people working in the national health service-that we think of it in those terms. The ratio can raise questions and concerns that need to be addressed, but we should not treat it as a verdict on performance, because it is not that.
	The hon. Gentleman began by saying fairly that a good standard of care is being provided across the NHS, and it is right to remember that in moments such as this. There are 14 million hospital admissions every year and, as we have said many times, patient satisfaction with the NHS is running at historically high levels. He asked me how failures occur. Obviously, in respect of Basildon and Thurrock, that is now the subject of detailed work, and I will update the House as and when I have more information to give.
	In respect of this case, and that of Colchester, it is important to say that the regulators have said that it is not in the same category as Mid Staffordshire NHS foundation trust. It is important to make that distinction. However, that is not a recipe for complacency and it is crucial that the questions raised are properly investigated and conclusions reached and disseminated. I assure the hon. Gentleman that that is what will happen in this case.
	The hon. Gentleman asked whether every case should be investigated, and he referred to the Dr. Foster data in that regard. I agree with him that those are very important and I, too, would want to ask further questions about those data and how that finding was reached. He should know that it is a requirement of the National Patient Safety Agency for every serious incident or death to be investigated, and I reiterated that point in my statement this afternoon.
	The hon. Gentleman questioned the role of all the different bodies commenting on such matters. After the creation of a culture of challenge and benchmarking and the use of data across the system, it is inevitable that there will be many voices in this debate, but the Care Quality Commission is the authoritative voice that this House should listen to. It was set up by Parliament to provide authoritative advice on such matters.
	The hon. Gentleman also questioned the process of self-assessment as used by the CQC. That will be the bedrock of any regulatory system, but he will know that the CQC overlays that with a range of other measures and data that it receives from a range of sources. It is that 360° analysis of what is happening at any particular hospital trust that triggers its decision on intervention.
	The hon. Gentleman also asked about pay. I acknowledge the concerns that people have about excessively high pay across the public sector, but particularly in the national health service. I know that he speaks for many people in voicing those concerns. Of course the boards of foundation trusts are independent of Government, but we wrote to them some months ago to remind them that they should set pay in accordance with wider pay trends in the public sector and, at a time such as this, they should at all times show restraint in setting awards.

Andrew MacKinlay: My right hon. Friend the Member for Basildon (Angela E. Smith) wanted to be here but she is in Committee. However, although I have been working closely with her over the weekend, my question is my own.
	The question that I want to ask is this. Monitor tells us that there has been a significant breach in the terms of the authorisation of the foundation trust at Basildon and Thurrock, citing
	a poor care environment in AE...inadequate arrangements to treat children...breaches of infection control,
	high morbidity and mortality rates, and general problems with health care standards and governance. Does the Secretary of State share my view that it is incredible, untenable and unacceptable that the chief executive has not decided to step aside? I include in that some other executive directors, particularly the one charged with ensuring oversight of and compliance with the cleaning contract. There is a question of public confidence in Basildon and Thurrock. Basically, Monitor and the Secretary of State need to address it with some urgency. It is unsustainable that the people who have been found by Monitor, in the words that I have quoted, to be in such significant breach should still be in post this afternoon. I understand that there is a problem-

Mr. Deputy Speaker: Order. The hon. Gentleman has more than made his point-and I think that he did ask a question in there somewhere.

Andy Burnham: I heard one, Mr. Deputy Speaker, and I respect the fact that my hon. Friend was speaking for our right hon. Friend the Member for Basildon too in this regard.
	My hon. Friend is right to say that every possible step must be taken to improve standards, but the test that Monitor must apply-I met Monitor last week and discussed this in detail-is: what action is most likely to achieve the quickest improvement and turnaround at the trust? That is what matters, I would say, to his constituents and those patients served by the hospital. The judgment is: how can the trust get improvements as quickly as possible? In this case, Monitor's judgment was that action was needed to strengthen the clinical leadership in the trust-both the medical and nursing leadership-but that standards were likely to improve more quickly by keeping the action plan that had been developed under the leadership at the trust. Monitor assured me that the action plan that had been developed was a good one, but said that it did not believe that progress on it had been sufficient to date, hence the need for the escalation of its activities.
	I hear my hon. Friend's further concerns about the cleaning contract at the trust. I am afraid that I do not have a specific answer to give him today, but I will write to him in detail on that matter.

Eric Pickles: I am very sorry to tell the Secretary of State that the situation with Monitor is not quite as he described in his statement. Monitor has had concerns about the level of mortality in Basildon for more than a year, but its intervention was slowed down because, in its words, it is complicated and difficult to intervene. My constituents deserve something better than to be held back by a process that has become complicated and difficult. After Mid Staffordshire, complicated and difficult is not a reason for non-intervention.

Andy Burnham: I hear what the hon. Gentleman says. I asked the same question of Monitor and the CQC last week, which was: when were the concerns identified and has there been improvement? I am assured-I will write to him with the figures-that there has been a discernible improvement on the mortality ratio at the trust over this year. I will give him the figures that indicate that the plan that had been developed, which I referred to in my answer to my hon. Friend the Member for Thurrock (Andrew Mackinlay), is having some effect. Nevertheless, I hear what the hon. Gentleman says about whether that improvement has been speedy enough. That was why a decision was taken to escalate the action. There has been a significant focus on the trust over this year, which suggests that the regulatory regime picked up the concerns at the trust. I expect to see immediate improvements as a result of the actions that have now been taken, and will report to all hon. Members on those improvements as they follow.

Jim Dowd: Since the House rose for the summer recess, I have received extensive cardiac treatment at Lewisham hospital and a bypass operation at King's College hospital in September. The service that I received throughout that period, and which I continue to receive, has been exemplary. As a beneficiary of the services of the NHS, I cannot speak highly enough of the services in south-east London, which brings me to the Dr. Foster analysis. When I was at University Hospital Lewisham just this morning, as part of my rehabilitation programme, I took the opportunity to speak to the chief executive and the chairman of the trust. They are at some loss to understand how on the basis of the same data, both the Care Quality Commission and CHKS, the leading independent-sector supplier of health intelligence, managed to find it good, with CHKS putting it in the top 40 performing hospitals in the-

Mr. Deputy Speaker: Order. I am reluctant to interrupt the hon. Gentleman, but perhaps he would now put a question to the Secretary of State.

Jim Dowd: What action can my right hon. Friend take to ensure that people are not given conflicting information on the basis of the same data, which serves only to undermine the NHS and the people who work in it?

Andy Burnham: I am grateful to my hon. Friend for that question and I note his praise for the staff at both King's College and Lewisham hospitals, who will hear his kind words. It is important that my hon. Friend speaks in that way, because at moments like this, there is a tendency to cast a cloud over all the people working in the NHS, yet, as we all know, the vast majority of our constituents receive outstanding care from the NHS and it is crucial that these issues are at all times kept in context.
	Contrary to what the hon. Member for South Cambridgeshire (Mr. Lansley) said, I am not shooting the messenger. Nevertheless, the safety ratio used for this piece of research is a new calculation and, as was rightly said, there has been some challenge to that calculation by a number of hospital trusts. I think that it is a healthy thing that there is a process of challenge in respect of these matters of the utmost importance, but I would also defend the right of hospitals around the country to counter suggestions if they believe that they give an unfair portrayal of the standards at any particular trust.

Graham Brady: It is not just the safety ratio that some trusts have challenged. The Health Secretary will know that the South Manchester trust has flatly rejected some of the factual findings in the Dr. Foster report, particularly with regard to being accused of leaving foreign bodies in patients after surgery. It says that there is no evidence of that having happened at all at the trust. Will the Secretary of State rapidly give a clear statement to the House setting out where there have been factual errors in the work that has been done?

Andy Burnham: The hon. Gentleman is right to refer to the strong words from South Manchester NHS trust. I do not think that there is any debate about the data that have been used, although there is some debate about the methodology that has then been applied to those data and the resulting scores. For instance, if we look at the Basildon and Thurrock trust, we see that it scored within expected limits on nine out of the 13 measures looked at by Dr. Foster, and it scored 98 out of 100 on one of them. I do not draw attention to that in order to dismiss the work that has been done, but it is nevertheless a complicated picture and it is not entirely clear why a score of 0 out of 100 was merited. It is important to recognise that this methodology has not been used before. It is helpful that there is a process of challenge about safety in the NHS because there always should be an ongoing dialogue about improving safety, but some trusts are, I think, justified in raising concerns about this methodology if they do not believe that it fairly reflects the standards at their trusts, especially if that portrayal gives rise to undue concern among the local community. The hon. Gentleman is right that there should be a process of interrogation of this methodology, but I am sure that that will happen in the coming days and weeks.

Paddy Tipping: Is it not the case that patient satisfaction at these two hospitals and across the acute sector as a whole is very high, with 90 per cent. of patients judging their care to be good to excellent? Despite that, what more can be done to put patients at the centre of the NHS so that they receive good-quality treatment rather than being merely the passive recipients of care?

Andy Burnham: My hon. Friend makes a very important point. He is right that the latest findings on patient satisfaction in the NHS show that 93 per cent. of patients rate the care that they receive as excellent or good. I have asked myself precisely the same question as my hon. Friend and I referred in my statement to my intention to bring forward proposals soon about how we can link payment for hospitals more closely to patient satisfaction and quality, as indicated in Lord Darzi's next stage review. I think that it is the way forward. It will enable us to focus the minds of those working in the management of hospitals on patients and, as my hon. Friend suggests, to make them the centre of concern. We will shortly present plans to increase the proportion of the tariff system that is accounted for by quality and safety.

Several hon. Members: rose -

Mr. Deputy Speaker: Order. A number of Members are seeking to catch my eye. Unless we have much briefer questions-just one question each-and much briefer answers, a number of Members will be disappointed.

Michael Jack: Blackpool, Wyre and Fylde Hospitals NHS Foundation Trust has worked very hard to reduce hospital infection rates at Blackpool Victoria hospital, and was deeply disappointed by the Dr. Foster analysis. What steps will the Secretary of State take to reconcile those different assessments of safety in hospitals so that the public can be reassured that their local hospital is as safe as the management say it is?

Andy Burnham: I have checked, and I know that the trust has been working hard across the board to improve safety standards. It has good progress to show for that work. I can tell the right hon. Gentleman and his constituents that the authoritative voice on these matters is the Care Quality Commission-although there will always be other voices challenging its assessment-and I refer him to the commission. There will, of course, be debate about the findings over the coming days.

Geoffrey Robinson: Today, in the light of the inclusion of University Hospitals Coventry and Warwickshire NHS Trust in the 12 trusts that were analysed, I spoke to its medical director, Dr. Richard Kennedy. He had taken great exception to the findings of Dr. Foster, particularly those in respect of the standardised mortality ratio. The hospitals had provided Dr. Foster with amended data a month ago to conform with the new arrangements that were being sought, but the Dr. Foster organisation had chosen not to take any notice of those data or to include them in its findings. Will the Secretary of State take that up with the organisation, and ask why it happened?

Andy Burnham: When there have been such instances, I think it important for the facts to be established, and for clarification to be provided for trusts in that position if it is needed. It is not acceptable for concern to be raised at local level which is not justified. My hon. Friend has made his point very clearly, and I hope it will be followed up by both the trust and Dr. Foster. However, as I said to the hon. Member for North Norfolk (Norman Lamb), the hospital standardised mortality ratio is not in itself a verdict on hospitals. It is simply a trigger for investigation.

David Amess: Basildon hospital enjoyed a first-class reputation when I was Member of Parliament for Basildon, and I am shocked and saddened by what has happened. If it is true that patients are to be transferred from Basildon to Southend, what assistance will the Secretary of State give Southend hospital to help it to cope with the situation?

Andy Burnham: I am sure that it was not just the hon. Gentleman's departure that led to what has happened. Having served with him on the Health Committee, I know of the great interest that he takes in health matters. It is and will remain our policy for patients to have full choice across the national health service. We want to see the regular publication of higher-quality data, and that is at the heart of the new regulation regime that will be introduced next year. We have also introduced NHS Choices. If more patients choose to use Southend, that is their choice, and Southend will of course be paid accordingly by the necessary commissioners.

Ken Purchase: Will the Secretary of State accept that the obsession with structures, trusts and foundation trusts is entirely irrelevant to the level of care that we expect in our hospitals? Will he understand that the spending of a million pounds a throw on foundation trusts is simply a waste of money, and that the best work he can do is to put more money into front-line services, get rid of all this architecture-I think that that is what new Labour calls it-and concentrate on delivering a health service worthy of the name?

Andy Burnham: I hear what my hon. Friend says, but I am afraid that I disagree with him. If he speaks to chief executives and the senior leadership in any foundation trust in the country, he will find that the most helpful process they have been through is the process of applying for foundation trust status, as that gives them information about their organisations that they did not have before. The process has led to rising standards across the health service. While we cannot be complacent and we want to improve standards in foundation trusts where we need to do so, in many cases this reform has led hospital trusts to raise their game and improve what they do for local people.

James Brokenshire: The Secretary of State must appreciate that throughout the country there will still be considerable uncertainty as to the standards of care provided at hospitals. In his statement, on the one hand he implied that the CQC was authoritative, yet on the other hand he said that, where legitimate concerns had been identified, they would be followed up. Can he be more specific on how they will be followed up, and assure the House about the timetable for this, so we can get some greater certainty given the information that has been provided over the past few days?

Andy Burnham: I can indeed give the hon. Gentleman that assurance. That is the job of the CQC: its job is both to provide regular supervision of performance across the national health service, and where concerns are identified, to intervene and ensure that the necessary action is taken. It acted in respect of Basildon and Thurrock, and because it had not seen sufficient improvement, its concerns have now escalated and it is working in tandem with Monitor. That is how the process works. Where there are concerns about other trusts, it will follow them up with those trusts. I repeat what I said in my statement: I will update the House where any action has been taken.

Richard Taylor: As the Select Committee on Health has recently completed a report on patient safety that contains many helpful conclusions and recommendations, will the Secretary of State use his good offices to ensure that we have a full debate on patient safety?

Andy Burnham: I certainly agree that patient safety is of the highest importance and that it is crucial that this House devotes time to debating how to raise standards of patient safety. It is the one area where we can confidently say that there must never be complacency. There must be a continual process of interrogation of standards at all trusts, and just when a trust feels it is doing well enough, it should look again and improve its performance even further. I agree with the hon. Gentleman that we need to devote more time to debating patient safety on the Floor of the House.

Bob Russell: I am grateful to Mr. Speaker for agreeing to my request for a statement on Colchester hospital. There is great concern and anxiety among the local population, and there is a need for urgent steps to be taken to give reassurance and to bolster the morale of staff throughout the Colchester Hospital University NHS Foundation Trust. That said, I attended the trust's annual meeting, and what was said there does not reflect what we are hearing now. There appears to be a battle between the various quangos. Does the Secretary of State agree that we are witnessing the consequences of a box-ticking, target-setting agenda and that there is an urgent need for local democratic accountability?

Andy Burnham: I have to say that I do not agree with the hon. Gentleman. While I respect his views about his local trust, the regulator identified a number of performance and governance concerns, and it asked for a process of improvement at the trust. That did not follow within the time scale requested. I will defend the regulator in taking firm action, where standards need to rise. The hon. Gentleman will know that the foundation trust model allows patients to become members of a trust and to hold it to account. I encourage him and his constituents to use the voice that that reform gives them to hold their local trust to account and have their say in the delivery of local health care.

Kevin Barron: My right hon. Friend said earlier that NHS patient surveys always show very high satisfaction scores. Does he agree, however, that such surveys are not a good way to measure the variation in standards and safety in the national health service and that we need to make sure that we have the right mechanisms in place so that the best that is delivered in any hospital in the United Kingdom is achieved in every hospital in the United Kingdom?

Andy Burnham: I agree with the Chairman of the Health Committee that patient satisfaction is an important part of quality, but it is only a part of quality. It needs to be set against clinical safety standards and, of course, clinical effectiveness; it is crucial that the broadest possible view is taken of quality in the NHS, and that was the conclusion of Lord Darzi's next stage review. I assure the Chairman of the Health Committee that as we develop plans for the NHS in the coming period, we will seek to embed the conclusions of that review in the payments structures of the NHS, so that there is a relentless focus on quality and safety in every NHS organisation.

Bob Spink: Basildon hospital serves my constituents and it has some wonderful, caring staff, but since 2005, I have raised serious problems with the trust, which have not yet been addressed. On a specific point, may we empower patients and families by routinely providing them with personal antimicrobial products, so that they can actively participate in preventing the spread of health-care-associated infections in Basildon, as well as in all UK hospitals?

Andy Burnham: I hear what the hon. Gentleman says. I have not visited that hospital recently, but I am confident that, as happens in many other hospital trusts now, alcohol gels and other products will be freely available in the hospital environment for people to use to bear down on rates of infection. It is also important to say that rates of infection have decreased significantly right across the national health service, in respect of not only MRSA, but clostridium difficile. He is right to say, again, that there can be no complacency on this issue, and I am sure that the leadership at the trust will have heard his comments today.

Bernard Jenkin: May I remind the Secretary of State that new Labour was originally elected on the slogan 24 hours to save the NHS? That now rings all too hollow to people who rely on Colchester general hospital for their health care. Will he reflect on that and explain why he is still having to make announcements of this nature, given that health expenditure has doubled since the Government were first elected?

Andy Burnham: The hon. Gentleman has a short memory about the state the national health service was in during the 1990s, when people routinely waited hours on end in accident and emergency departments up and down the country. I was looking last week at the patients charter, which, in the mid-'90s, set an 18-month maximum wait for treatment and a year's maximum wait for heart bypass operations. Will he tell us how many people waiting for those heart bypasses never got to have the final operation, such was the state of the national health service in those days? Improvement has taken place in the NHS, but I say again that I do not over-claim for the NHS. When it needs to be better, I will say so and we will take the necessary action to make it happen.

John Baron: Having met the management of Basildon hospital on Friday and toured a number of the wards, including the accident and emergency wards, I have been assured by the management and clinical staff that the hygiene recommendations of the CQC report have been implemented in full, with the help of a nursing taskforce. The key concern for my constituents is safety for patients in the hospital and for those about to go into it. How quickly can the Health Secretary report back to us on the progress and effectiveness of Monitor's intervention for the sake of those patients and of the many people in Basildon hospital who are doing excellent work?

Andy Burnham: I welcome the close interest that the hon. Gentleman is showing in this issue. I want to give him the facts so that he can then make the necessary statements to local people in his constituency about the performance of the trust. I do not seek to put any spin on it; he can have those facts to show whether improvement is coming quickly enough.
	As I said to the hon. Member for Brentwood and Ongar (Mr. Pickles) a moment ago, improvement has been made this year on the mortality ratio. I shall give the hon. Member for Billericay (Mr. Baron) those figures, but the judgment is that the progress needs to escalate. The trust now has the benefit of two senior professionals from one of the highest-performing trusts in the country, both on the medical and the nursing side. We expect them to start work immediately and a programme office based at the trust will be monitoring and overseeing progress. I shall give him updates as and when they are available, but I agree with him that improvements need to be immediate.

Peter Bone: Basildon is one of seven trusts that have been shown to have a high mortality ratio not just for one year but for five years. One of those other trusts is Kettering, which serves my constituency. What will the Secretary of State do about the other six trusts identified by Dr. Foster?

Andy Burnham: May I say to the hon. Gentleman that this ratio was developed by Professor Brian Jarman, and we very much encourage its use? However, it is not of itself a verdict on a trust's performance. It is simply a trigger that then gives cause for more investigation and inquiry. In many cases, trusts that have had a high mortality rate have been able to bring it down. There may be a number of reasons why a particular trust has a high standardised mortality ratio and the circumstances need to be investigated. I assure the hon. Gentleman that those trusts will be investigated. If we need to take further action, of course, we will.

David Heath: It is not just about chief executives and managers. Every single surgeon, doctor, nurse and other professional has a professional duty of care to reduce risk. To that end, and to help them, can the Secretary of State tell me what progress has been made in introducing the checklist procedure for individual procedures that was pioneered in the Johns Hopkins hospital and that is shown to reduce morbidity and mortality rates? Is that being taken forward throughout the health service?

Andy Burnham: I assure the hon. Gentleman that it is being taken forward. If he does not mind, I will write to him with a detailed progress report on how adoption is proceeding through the national health service. I agree about the techniques pioneered by an institution as eminent as the Johns Hopkins university hospital in Baltimore. We have worked and looked internationally to use the best standards. The NHS has a reputation for learning and implementing quickly some of the best standards from around the world, but I will give the hon. Gentleman an update along the lines that he seeks.

Andrew Pelling: Does the Secretary of State accept that it causes consternation and concern when the CQC rates hospitals as good and then Dr. Foster reveals such difficulties? It undermines confidence. In my constituency, in the Mayday hospital, there were issues to do with process that unfortunately led to constituents passing away, but then the CQC rated my hospital as good. Should I now feel that the CQC process for my hospital should be questioned?

Andy Burnham: I say again to the hon. Gentleman that the CQC is the authoritative voice on matters of safety and quality in the national health service. It was set up by Parliament to do that job. It takes a broader view of safety and quality in the NHS, looking across a much broader range of indicators than those used by Dr. Foster. However, I do not dismiss the work that has been done by Dr. Foster. In the case of a number of trusts that have been identified as a result of this work, there needs to be a further process of inquiry to establish whether the concerns are justified. The methodology used is new, and it needs to be questioned so that the hon. Gentleman can give clear advice to his constituents. I say again that the CQC is the leading and authoritative body set up by Parliament to do that job.

Points of Order

David Taylor: On a point of order, Mr. Deputy Speaker. Can you say whether you have had any indication from the Chancellor of the Exchequer that he intends to confirm in a statement that non-domicile tax status will not apply to rich kids living in Richmond and Kingston unless and until those two boroughs secede from the United Kingdom?

Mr. Deputy Speaker: I am sure that it will be no surprise to the hon. Gentleman to hear that I have had no request for such a statement

Andrew Pelling: On a point of order, Mr. Deputy Speaker. I enjoyed seeing the Christmas tree going up over this weekend when I was working here at the House, but I note that it was blown down this morning. Is there an appropriate place to raise issues about the safety of visitors and people working on the parliamentary estate now that we have seen the tree blown down? Is there a precedent for the Christmas tree falling down and is it a bad omen for anybody?

Mr. Deputy Speaker: All I can say to the hon. Gentleman is that steps are being taken to ensure that the tree is re-erected and I am sure that it will be put back safely.

Financial Services Bill

[Relevant Documents: The Fourteenth Report from the Treasury Committee, Session 2008-09, Banking Crisis: regulation and supervision, HC 767, and the Government and Financial Services Authority responses, HC 47, Session 2009-10.]
	 Second Reading

Alistair Darling: I beg to move, That the Bill be now read a Second time.
	As the House well knows, the whole world economy has been hit by a severe financial crisis, resulting in the worst global downturn for well over 60 years. Fundamentally, the crisis was caused by the failure of people operating in the market around the world fully to understand and keep up with the consequences of financial innovation and globalised markets: quite simply, people took on too much risk and became too exposed in relation to some products. There are clearly lessons to be learned by Governments, regulators and central banks, who in too many cases underestimated the threats posed by system-wide risks and did not fully appreciate the implications of financial activity outside the regulatory scope.
	It has been necessary to make some major changes, including in the way firms are managed, which as I have said on many occasions is the first line of defence, and in relation to the quantity and quality of capital the banks hold, and in the way regulators monitor firms. Over the last year or so, we have already taken action to ensure that the UK authorities have powers to deal with failing banks, as well as to protect consumers and taxpayers. The Banking Act 2009 established a new permanent special resolution regime that has allowed the authorities to deal with failing banks and building societies. As the House knows, we have already used that measure in respect of the Dunfermline building society earlier this year. Similar powers in the emergency legislation that allowed us to nationalise Northern Rock also allowed us to deal with Bradford  Bingley when it got into difficulties. The House saw the problems we had before we had those powers, so the Act has provided us with a useful way to resolve things if banks get into difficulty.
	In addition, the Financial Services Authority is implementing the conclusions from Lord Turner's recommendations on how to strengthen the regulatory regime. We have also seen the proposals on reform of corporate governance recommended by Sir David Walker in his report last week. Although those reforms may not have received as much attention as his proposed reforms of bankers' pay, they are all important and they all need to be implemented.
	We have taken the lead in reforming international regulation through the G20 and the Financial Stability Board, as well as in the European Union, because international co-operation and co-ordination are very important, as we have seen. The origins of the problem may have been in only one part of the world, but within a matter of weeks it affected just about every part of the world. The days when we could be content that we had a regulatory regime that was fine for our own jurisdiction are behind us. We need to make sure that there is international co-operation, and that it continues in the future. We have also taken measures to clean up banks' balance sheets, and the process has been worked through, including the introduction of the asset protection scheme.
	The final part of the reforms we need to put in place relates to the powers available to the FSA, on which we consulted following my statement of 8 July. We published a White Paper and the Bill represents the conclusions that we reached following that.

Bob Spink: I welcome the Bill as far as it goes, but is there not time even now to include some protection for consumers on the pre-payment of goods-for example, furniture, holidays and concert tickets? That would be a very good thing, and would help to build confidence.

Alistair Darling: I shall come to the Bill's proposals on consumer protection, which we need to do more about. I am very much aware of the campaign being urged on us about pre-payment. We had some experience of that with the Farepak problems a couple of years ago. The provisions are not in the Bill because at this stage of this Parliament I wanted to keep the measure sufficiently small and manageable to ensure that, as I hope, it will complete all its stages before the end of the Session. That is not to say, however, that legislation on further consumer protection will not be necessary. I shall turn shortly to the measures that I propose.
	The purposes of the Bill are to build on the action that we took over the past year. We want to strengthen and reform financial regulation, as well as support better corporate governance and give more rights to consumers. The Bill ensures that prudential regulation and supervision of firms is more effective. It will place far greater emphasis on monitoring and managing system-wide risks and will tighten the powers available to the FSA on the remuneration of banks, which is important for financial stability, as well as providing consumers of financial products with better support and protection. Our central objective must be to ensure that as we come through these problems, we reform and strengthen the financial system and rebuild it for the future.

David Heath: Is there not another set of players who could put pressure for good governance on the financial institutions? I mean the credit rating agencies. If they were to take adverse conclusions from short-termism, as evidenced by excessive pay or bonuses or by over-complex financial products, it could have a strong effect on the various financial institutions. Can the Chancellor encourage the agencies to do that, and if they will not-because they are paid for by those same businesses-is there any way of bringing them within a regulation process?

Alistair Darling: The hon. Gentleman raises a very real issue. He will recall that in 2007 there was a great deal of concern about the role of credit rating agencies, especially in rating the products that had managed to get the system into so much difficulty. I shall shortly be touching on EU proposals to make sure that credit rating agencies are supervised on a Europe-wide basis, because by their nature such agencies operate across several countries, so regulation by one country alone would not be sufficient. That is a major step forward, but America has to do the same thing, because credit rating agencies are based there too-indeed, sub-prime products and certain other products emerged from that side of the Atlantic. The hon. Gentleman makes a strong point.
	I want to say a few words about the UK regulatory architecture, which is one of the areas on which there is a difference between the two sides of the House. I may be able to anticipate one of the arguments that will be advanced from the Conservative Benches about the architecture of our present system of regulation. To attempt to blame what has happened in the UK on our system of regulation, or the architecture or set-up we have in this country, does not hold water. If we look around the world, we see that just about every country has been affected by the problem, and whereas in this country we have two bodies responsible for regulation-principally the FSA, but also the Bank of England-most countries have rather more. In the United States, for example, several different organisations are all involved in the business of regulation. As I said when we discussed the matter briefly in the Queen's Speech debates last week, the US is trying to address that issue.
	Every country's system has encountered problems, but what matters-certainly in my experience-is what the regulators actually do, and the judgments that they exercise. I strongly believe that any changes to the system need to build on experience and to address areas in which there have been deficiencies. The changes need to be practical and workable, which is why I am not persuaded about upheaval in the regulatory regime, or that bringing everything together in terms of monetary and regulatory policy for institutions large and very small makes any sense.
	Obviously, the functions of institutions-the central bank, the financial regulator, and finance and economics Ministries, which in our case means the Treasury-are central to the maintenance of financial stability in just about every country. The organisational relationship we now have in the UK-involving the FSA and the Bank, which is responsible for financial stability too-is much simplified compared with what we had, and we can build on it.

George Osborne: The House is less heated than it often is when we have these exchanges, which is a good thing, so may I ask the Chancellor in all seriousness whether he agrees that there seems to be a trend in many countries to try to put the central bank back in charge of prudential supervision-where it is not already in charge? I am sure the Chancellor has met Stan Fischer, the Governor of the central Bank of Israel and also former chief economist at the World Bank. He says:
	It is very likely that prudential supervision will return to central banks when the lessons of this crisis are drawn.
	Jacques de Larosière-the architect of the European changes-says that
	 in our present world it's good to have the central bank in charge of supervision.
	Although of course there were many problems in many different regulatory regimes, one of the emerging consensuses after what has happened is that central banks need to be in charge of prudential supervision.

Alistair Darling: I agree with the hon. Gentleman that this is not a case where there is a definite right answer, although there are plenty of definite wrong answers. This is not a case where I am saying Absolutely from the start, so I think he is mistaken-I am not saying that at all. What I am saying is that we have made a distinction regarding the functions of the central bank, which essentially involve monetary policy-obviously-and macro-prudential issues, where the bank needs to take an overview of what is going on in the economy in terms of its monetary duties and financial stability.
	A single organisation that deals with monetary policy and with some of the bigger macro issues, and which is responsible for the individual regulation of banks large and small, as well as of financial advisers, some of which are very small indeed, makes no sense. There are frequently times when it would be very tempting to tell one person, You're in charge of the lot-sort it out. If you don't, everything will be your fault and you'll have to make way for someone else. However, we have to remember that when the Bank of England was responsible for the larger banks years ago, there were far fewer of them. They were also all very British, in the sense that they were based here and the people we had to deal with were here, not spread throughout the world. However, the Bank of England never dealt with the insurance companies, it could not deal with what happened in the '80s, when we saw the growth of bank assurance, and it could not and never did deal with some of the other financial institutions that can affect financial stability.
	We can argue where we should draw the line, and wherever we draw it there will be anomalies. However, the system that we have-we should remember that the FSA took over from about nine different self-regulatory organisations 12 years ago-represents a sensible way to proceed. It is easy for the FSA and the Bank to work together, and the Treasury will always be at the table in times of crisis, for the perfectly obvious reason that any rescue will have financial implications. However, I honestly do not believe that bringing everybody under the same roof-it would be a very large roof indeed-makes any sense.
	The hon. Member for Tatton (Mr. Osborne) mentioned Jacques de Larosière, who was asked to produce a report for the European Union, and I wanted to touch on that earlier, because the House will be interested to know where we have got to. In Europe we will not, of course, have a single regulator. De Larosière suggested, first, that there should be a council for financial stability, which is advisory, and that is fine. The European Central Bank clearly has a view as to what is going on in Europe, but of course, its relationship is not the same with every country, for perfectly obvious reasons. De Larosière is also setting up three agencies to look at different aspects of the financial sector. All that sits together with the individual national regulators, and that in itself-the hon. Gentleman and I might have more common ground here-is problematic, shall we say? We are trying to solve some of these problems, but they are there.

George Osborne: On that point, I should mention that Jacques de Larosière took part in a meeting with my hon. Friend the Member for Fareham (Mr. Hoban). The Chancellor dwells on his views, so let me tell him what he said:
	Personally, having the experience of seven years at the Banque de France, and therefore also the chairman of the Commission Bancaire, I really think that in our present world it's good to have the central bank in charge of supervision. Because it is in the market every day...So personally, not as the author of the report
	-the Conservative party's report-
	I would very much support your proposals.

Alistair Darling: I am glad that the meeting with Jacques de Larosière was so convivial. As he was discussing the Conservative party's proposals, I was not there and I am in no position to comment on what he said. All that I would say is that having seen his report, I think that there are still issues that need to be resolved in terms of what can be regulated at a European level and what is regulated here.
	In the United Kingdom we have a very complex financial services industry. Many of the banks operating in this country are regulated in different parts of the world even though they have major presences here. We have the banks and we have the insurance companies-we have a wide range of institutions. On the basis of my own observations and my experience over the last two and a half years, I would think long and hard about putting all those bodies under an organisation that was regulated ultimately, I suppose, by the Governor of the Bank of England, no matter who that happened to be. I would also worry-this is not just my worry; it has been repeated outside the House-that if we made the changes that the hon. Gentleman proposes, there is the risk that someone may take their eye off what they are supposed to be doing, and we get into difficulties, although I know that the hon. Gentleman has given assurances on that subject.
	The structure that we have with the Bank and the FSA is the right one. We are not going to agree on that, and there will always be an argument as to where we draw the line. However, I draw it on a purely practical basis, because the most important thing that we need to keep in mind is not so much the architecture. At the end of the day, we can make any organogram work, but what matters is whether we know what is going on in the first place, and when we find out what is going on, whether we make the right calls and see the process through. If we get that wrong, it really does not matter how we have brigaded all the regulators. The most important thing is making the right calls.

Sally Keeble: Will my right hon. Friend comment on an issue that has been of some concern to me? If we return all the supervision to the Bank of England at a time when quantitative easing is going on as well, the Bank would be trying to do two things: it would be trying to reflate the economy at the same time as it was trying to supervise the institutions involved. There could be a real conflict of interest over what the Bank was doing.

Alistair Darling: That could be the case, but the Bank's principal responsibility for 10 years related very much to monetary policy, and quantitative easing is part of that. I worry what we would bring to the issue if we simply backed the FSA into the Bank of England, other than that one person would nominally be in charge of the whole organisation.
	As I have said, I understand the case that others make, but I approach it from an entirely practical perspective and regrettably-I use the word advisedly-I have had a lot of experience of this issue in the last two and half years. I have observed first hand some of the do's and don'ts, and I may set them down one day-[Hon. Members: Ah!] Some of my proposals and the lessons that I draw are reflected in the Bill. I do not want to labour the point; I simply think that the proposal to put everything under the Bank of England is inherently risky, and I would not do that.

Mark Field: I agree with what the Chancellor says, broadly, about the practical application. However, in what he said to my hon. Friend the Member for Tatton (Mr. Osborne) he recognised that there is a fundamental difference in the outlook of the Labour party and that of the Conservative party. Is he not concerned that the increase in the FSA's powers proposed in the Bill comes at a rather strange time, given my party's commitment to get rid of it? How will we able to employ the brightest and the best to take on these new powers if the sword of Damocles will be hanging over the FSA in the-probable, I hope-event that we have a Conservative Administration before too long?

Alistair Darling: I do not really think that that is a problem of my making. However we organise things, we need to ensure that the regulator has sufficient powers, and I would like now to say why it needs those new powers, because I think that they are necessary no matter what we do.

Stewart Hosie: Will the Chancellor give way?

Alistair Darling: May I make some progress before coming back to the hon. Gentleman, or does he want to ask me a generalised question?

Stewart Hosie: I agreed with the Chancellor when he said that the difficulty was not the structure but whether someone takes their eye off the ball-but I hope that he can explain something. We have had Bank of England stability reports for 20-odd years. The stability report immediately before the crash in 2007 said:
	The UK financial system remains resilient...well capitalised and highly profitable.
	It referred to
	strong flows into riskier assets
	and structural developments, but it said that there had been an increase in
	the risk-bearing capacity of the system.
	The entire document was filled with such comments and contradictions. So irrespective of the structure, how can the Chancellor ensure that we do not get a document from the new Council for Financial Stability that takes its eye off the ball like that, or glosses over very real risks once they are identified?

Alistair Darling: First, the hon. Gentleman rather makes my point that, never mind the architecture, what matters is that the people who are charged with doing the job actually do it. They will not always get it right, but although some people say that they saw all this coming-some of whom, I am bound to say, forgot to tell anyone else that they could see it, but I am sure that they could-it is important that we have regulators and supervisors who do the job.
	Secondly, the Bank of England or the FSA produce reports at the moment, but the reports can just lie there. Of course, many reports were acted upon, and many of them picked up in one way or another, but one of the things that I want to achieve through the Council for Financial Stability, which I shall come to in a moment, is a more formal process, so that when the Bank of England publishes its six-monthly reports, the council-the FSA, the Bank of England and the Treasury-must consider them and decide what to do about them. That is a better way of holding people to account.

Andrew Pelling: rose-

Alistair Darling: I will give way to the hon. Gentleman, and then I shall make some progress.

Andrew Pelling: The Chancellor emphasised the importance of international co-operation and the associated complexity. Under the Bill, the FSA will have discretion to work in that area. Obviously, this aspect of regulation is of fundamental national interest, given the impact on the City's earning capacity. Under the Bill, how will Parliament be able to scrutinise and have some control over the FSA-to the extent that important interests might have to be given away in such negotiations with European regulators?

Alistair Darling: I will come to that shortly, but I should like to do so in what I think is a logical order.
	Following on from the exchanges over the past five or ten minutes or so, I have to say that it is important to formalise the relationship between, especially, the Bank and the FSA as well as the Treasury, so that we can ensure effective co-ordination. The council's draft terms of reference, which we have published today, set out the roles for each member institution. Under the Banking Act 2009, we formalised and strengthened the role of the Bank of England in protecting financial stability. We provided the Bank with a statutory objective of financial stability-it did not have that statutory objective until this year-and a lead role in dealing with failing banks under a special resolution regime. Alongside the Bank's responsibilities for monetary policy, liquidity, the oversight of inter-bank payment systems and its role in monitoring the financial system as a whole, that will give the Bank an enhanced supervisory role, as well as a role in assessing a firm's resolution plans-living wills, as they are commonly known-because it should also have that responsibility.
	The FSA, which is the single regulator, brings into one place the work of up to nine different regulatory agencies that were in place 12 years ago. As I told the hon. Member for Tatton, other countries have multiple regulators. For example, Hong Kong, China and India have separate regulators for banking, insurance and securities. The US Administration are trying to rationalise a highly fragmented regulatory model. Indeed, they are proposing a council that sits on top of the regulators because, for various reasons, they think that it will take too long to try to bring together the other regulators, even if they had congressional agreement to do so. Of course, in America many of those responsibilities are devolved to individual states, thus making the regulatory regime very complex indeed.
	By contrast, we have one regulator, and we are building on the advantages of the single regulator by enhancing the FSA's objectives and powers, to ensure that when conducting its supervision of individual banks, it takes into account the systemic risk that may be faced. That new macro-prudential element will enhance its ability to monitor, assess and mitigate risks to the country's financial stability. Of course, that sits alongside its new duties in relation to remuneration and living wills, to which I will return shortly.
	As the hon. Member for Croydon, Central (Mr. Pelling) has said, this crisis has also demonstrated the need to ensure that we have international co-operation, and we need to make sure that the Bank of England and the FSA work closely together on that. Clauses 1 to 4 will set up the new Council for Financial Stability, which will be responsible for considering emerging risks to the UK's financial stability and, as he has said, to the global financial system and for ensuring that we can co-ordinate the response by our authorities.
	The council will comprise the Governor of the Bank of England, the chair of the FSA and myself. It can draw on external expertise if necessary, but it will put that relationship on to a more formal, transparent and accountable basis. For the past 10 or so years, the relationship has been governed by a memorandum of understanding. I do not think that that is sufficient; it should be formal, based on statute, transparent and accountable. The authorities can then be held to account, and we can have greater parliamentary scrutiny in the House and the other place, as we set out in clause 3. Even though I suspect that the Bill will be going through the House for some weeks yet, we will ensure that the council is established beforehand, so that we can see that it is working and publish its minutes, as proposed.
	Clause 5, 7 and 8 will strengthen the FSA's objectives, by providing it with an explicit financial stability objective. When conducting its supervision of individual banks, it needs to take into account overall systemic risk.
	As I said, and as hon. Members have mentioned, the crisis has also shown that financial stability is not contained within national boundaries. We need a strong domestic regulatory system, but we also need co-operation. Clause 8 will formalise the FSA's responsibility to work internationally and to promote effective international regulation. It has been doing that already, particularly in relation to the colleges of regulators, which have been established over the past couple of years, to ensure that some of the larger institutions that span several countries are monitored by individual regulators, so that they can see what is going on and understand the risks to which they might be exposed.
	The hon. Member for Tatton asked about Jacques de Larosière's report, which will be on the Finance Ministers' agenda when we meet in Brussels on Wednesday. The European Union is trying to establish a new European systemic risk board, which will issue non-binding risk warnings and make recommendations. I believe that that is right and entirely sensible, and we will support it. Of course, that must go hand in hand with some more detailed, micro-prudential proposals on the European supervisory authorities, of which three are proposed to deal with banking securities, insurance and occupational pensions. They will have enhanced roles, but it is very important that we recognise that some things need to be done at a Europe-wide level. That makes a lot of sense to us. For example, some of our problems with Icelandic authorities would have been more easily resolved if they had come within a regime that allowed us to get hold of the situation before it reached a critical stage. There is a lot to be said for that, but it is important that certain things remain with us because, at the end of the day, in any crisis only national Governments have the resources if a rescue needs to be mounted. That is why one of our red lines is that we cannot have a situation where any of those new authorities can impinge in any way on the fiscal responsibility of member states. It is important not only that that is clearly stated-I believe that it will be-but that the mechanisms in place ensure in reality that the responsibility for any fiscal action lies with member states. That is how it should be; it is not something that can be effected even by the Commission or any of its agencies.
	It is important that we get right the regime for who would have the power to declare an emergency. At the end of the day, that must be a matter for the European Council-the people who are elected-rather than for an agency or the Commission. It is also important that direct powers over firms are curtailed, so that such powers exist only where absolutely needed. Individual regulation must be a matter for the member state and for the Government concerned.

William Cash: rose-

Alistair Darling: I did not think for one minute that I would get through a passage on Europe without the hon. Gentleman getting to his feet.

William Cash: I entirely agree with the Chancellor in his prediction. With respect to majority voting and the architecture that has been devised under the regulations, which we will debate again later this week, how is it that he can talk about national supervision, somehow giving an impression that we might be in control, when the real question is whether we are governed by majority voting in all these matters, as a result of which we will not be able to sustain the kind of City of London that we need in relation to GDP, as I said to the Prime Minister the other day? What is the Chancellor's answer to that question?

Alistair Darling: My answer is that in a world where many financial institutions operate in this country and in other European states, as well as in other parts of the world, there has to be greater co-operation. Look, for example, at what has been happening over the past couple of years or so between us, the Swiss authorities, the American authorities and the European Union. It is not in our interest to create a situation where an institution can escape the attention that it needs by going to a place where there is not sufficient supervision, but at the same time operate in countries where it can cause substantial damage. There must be increased co-operation.
	Iceland is a good example. It is not in the European Union, though it wishes to join at some stage, I believe, but it is in the European economic area. One of the Icelandic banks was operating in London with its headquarters in Iceland, but we did not have sufficient levers to head off some of the problems because we did not have the powers to do so. It could well be in Britain's interest in the future to be able to use the leverage of European supervision to try to ensure that we are not adversely affected by what we regard as a failure of regulation or insufficient regulation in another country.
	It is a fact of life that the financial services industry is about as mobile as it is possible to get. The last couple of years have demonstrated that, if anyone had any doubt about it. That means that it is in our interest to ensure that there is adequate supervision at a European-wide level, but I am clear that if an institution gets into difficulties and, for example, has to raise capital from a Government because it cannot raise it on the markets, that matter will very much be the responsibility of the individual state.
	Where the hon. Gentleman and I part company on this occasion is that he has an aversion to most things European. He does not accept that the world has moved on. It is now a much more complex place. That means that we have to decide on those areas where it is in our national interest to work with our European partners and those areas where we and other member states rightly say, No, this is a matter for which, at the end of the day, each nation state has to be responsible.

Mark Todd: I agree with all of that peroration but enter the cautionary remark that the venture of some European leaders into attempting the regulation of hedge funds and private equity is not an entirely reassuring model if one is looking for European regulation of the wider financial sector.

Alistair Darling: I am clear that we should accept those areas where it is in our interest to co-operate, but there may be other areas where that is not the case. There is a general point to be made in relation to Europe. Ten or 15 years ago, people talked about the competition between London, Paris, Frankfurt and so on. The decision that we have to make now in Europe is whether we want a world-class financial centre in Europe. The competition is now coming from different parts of the world.
	It is in Europe's interest that London, principally, and the UK financial services industry is properly supervised and regulated and is in a position to carry on attracting business and doing business throughout the world. That means that we will need co-operation within Europe, with the American regulators, with the Swiss regulators and with regulators all around the world. The red line, as far as I am concerned, is that if we are talking about a national Government having to provide capital, that must be a matter for that Government. It would not be right for everyone else to visit on one Government something that may have severe financial consequences.
	My hon. Friend mentions the directive on hedge funds that is going through the system. Of course there are areas where we must ensure proper supervision and regulation, but there are some people who would like to stop the business entirely. I cannot agree with that.

Andrew Pelling: The Chancellor raised the European issue too early in his speech. Surely we should have our eyes open and be aware that Frankfurt and Paris will see an opportunity to challenge London's primacy on the European markets. More importantly, unless the red lines are robust, is there not a danger of mission creep from regulators in Europe? The combination of a dirigiste approach to regulation and the past history of the FSA of putting through a lot of irrelevant regulation which, in the end, did not save us from the crisis, could mean that we have a tremendous burden of more micro-level issues than the rather grander macro issues which, as the right hon. Gentleman says, are important for European regulatory co-operation?

Alistair Darling: I agree with much of what the hon. Gentleman says. There is always a risk that we end up with national regulators and international regulators, with one set of regulations on top of another, and no clarity about who is responsible for what. There is sometimes a belief that if enough regulations are passed, the problem will be solved. Far from it-that might even create a few problems. That is why it is important to be clear about what needs to be done internationally.
	For example, by proposing that we set up colleges of regulators, we cede some of our authority by saying that we will work with Americans and with regulators in the far east, but we do that because it is in our interests. We do not want a situation to arise where only one regulator has a partial view of what is going on in one particular institution. If it comes a cropper, all of us will have to pick up the pieces. It is important to bear in mind what the hon. Gentleman says, but this country has argued for constructive co-operation for a considerable time, although when my right hon. Friend the Prime Minister first raised it in the early 1990s, there were not many takers because people did not think there was a problem. As we have seen in the past couple of years, there most certainly is a problem which needs to be sorted. That case is made.

Graham Stuart: rose-

Alistair Darling: I shall give way to the hon. Gentleman, then I shall move on to a different topic.

Graham Stuart: Does the Chancellor see a problem with vesting regulation in the European level, rather than co-operating on regulation at the European level, when, as he rightly says, the financial costs of any failure of regulation will fall wholly on the nation state?

Alistair Darling: I would put it this way: there is much to be said for co-operation. Many of the financial institutions in this country would say that it would be very useful to have a common rule book. Then they would not have to have a different regime for Britain, France, Germany and so on. In such a case, co-operation is essential, and I would like to see that. The problem probably arises not in normal times, but when there is a crisis. Then we must be clear about who and what triggers that emergency and who decides what needs to be done. At that point, particularly when it comes to fiscal consequences, which is essentially a matter for national Governments, they must be clear that it is they who make the decision.
	As I have said to hon. Members in the past, we naturally look at these matters from our point of view, and sometimes look at it only in terms of what we would do if we were on the receiving end. I can easily envisage a situation some time in the future when we will want Europe, if it can, to put pressure on a regulator in another part of the European Union to do something about one of its banks. That could have a knock-on effect on us. The point is that co-operation is needed, but we must be clear who is responsible for what.
	I shall deal briefly with other parts of the Bill, which may or may not be of interest to the House. Clauses 14 to 17 give the FSA greater disciplinary powers to suspend individuals and firms for misconduct. In clause 13 we are introducing a power to give the FSA power to ban short selling. The ban that was imposed in September 2008 was based on the market abuse directive. It is better that it should be based on the Financial Services and Markets Act 2000, which is what we are doing.

Stephen Hammond: The Chancellor is right that that is being done through the FSMA, but the powers on short selling are being vested in the general market abuse rules in that Act, implying that any short selling is a market abuse.

Alistair Darling: The Bill does not say that, and that is not my view. When the ban on short selling was introduced last year, I made the point that we were not saying that short selling was bad per se. However, in the particular circumstances and at that time, when financial stability was a big problem, action needed to be taken.
	Clause 30 gives the FSA greater powers to gather information, and clause 11 allows the FSA to take powers on remuneration and, if necessary, to prohibit certain remuneration practices. They are based on the important principle that we should avoid the situation whereby the remuneration practices of firms lead to people being rewarded for doing things that eventually bring down the institutions in which they work. That is something that we and, certainly, the institutions should not forget. If too many people in a bank engage in what is, frankly, speculative trading, they run the risk of bringing down their institution. There is a clear public interest in that situation, because there would be consequences for the public purse if such practice were not properly regulated.
	That part of the Bill is very important. It includes powers to implement the agreements that we reached in the G20 and those that we finally reached in Pittsburgh a few weeks ago, and it gives the FSA the powers that it needs not just to prevent such irresponsible pay, which has proved so damaging, but to implement Sir David Walker's proposals on disclosure. On that point, I can tell the House that we will table regulations on disclosure to go with the Bill.
	Sir David made a number of recommendations, but I think that we go further than he suggested. We want to consult on regulations for narrower disclosure bands than he proposed, starting with salary packages below the £1 million floor that he suggested. We will consult on that idea, but most people are convinced that far more disclosure is important, because they will then be able to see precise remuneration practices.

Sally Keeble: There has been some discussion about whether the Equality and Human Rights Commission will be able to look at disclosure and the studies of remuneration to see whether there is discrimination on pay banding. Will my right hon. Friend support that idea as part of an attempt to address the position of women in the City?

Alistair Darling: I understand that the commission would certainly be able to look at that issue, and I am sure that no one in this House wants to see discrimination. People should be judged and rewarded on their merit, and that is precisely the point, because rather too many people were not judged and rewarded on their merit. Indeed, some rewarding structures seem to have had completely the opposite effect, and I am sure that there would be no difficulty with the commission doing what my hon. Friend suggests, should it wish to do so.
	Clause 12 gives the FSA powers to ensure that there are resolution procedures for the larger banks and some building societies-procedures commonly referred to as living wills. It is very important that larger institutions have plans so that, if they get into difficulty, people are clear, before that difficulty arises, about what the institutions would do. That measure will help the regulators better understand what are, in some cases, complex structures-structures that have been put together for tax reasons.
	The regulators will also know the resolution options that might be applied, and they will be able to consider the obstacles to such resolutions, including, for example, complexity. If large institutions get into trouble, it will be clear which regulators will take responsibility, which countries will take responsibility and how the firms will be disengaged, so that those parts that are important for financial stability are stabilised, investors' and depositors' interests are maintained and credible measures are taken to deal with any difficulties that might be encountered. That is a very important part of the Bill. The clauses may be small in number, but they will have a very real effect, I hope, on the future. We have to reduce not only the probability of a firm's failure, but the impact of that failure, should it occur.

Stephen Hammond: The Chancellor is absolutely right: that is a very important part of the Bill. However, will he explain why the Bank and the Treasury have the power to make recommendations, and to recommend action, on those plans to prevent such a crisis from occurring, yet the SFA does not have to undertake to implement the actions proposed by either the Bank or the Treasury?

Alistair Darling: I think that the hon. Gentleman meant to say the FSA; the SFA is the Scottish Football Association. At the end of the day, the FSA would have responsibility in those circumstances, but it would obviously consider what the Bank and the Treasury had to say. Unless the FSA had very good reasons, it would be very difficult for it to turn down any helpful suggestions from either body, not least from the Treasury, as the Treasury, if the worst came to the worst, would have to provide the funds. However, it would not be quite the problem that the hon. Gentleman makes out. None the less, the introduction of resolution regimes is very important. The hon. Member for Twickenham (Dr. Cable) will no doubt again advance the cause of breaking up such banks from the start, but, as I have said before, I do not think that that is right. There is a far better way of dealing with the situation.
	The second part of the Bill that I want to deal with relates to supporting consumers. I shall do so fairly briefly, although it is important. It is important that we encourage people to know more about financial services and to understand the benefits and risks. Clause 6 gives the FSA the power to establish an independent consumer financial education body, which will deliver the implementation of the money guidance service from spring next year, as recommended by the Thoresen review a couple of years ago. The service has already been tried out in the north-west, and I understand that it is working. However, it is important that we can encourage people to know more about and understand the financial system, especially as it is in our interest to ensure that people save more and take advantage of financial products. That requires a certain amount of knowledge, however.
	Clause 26 includes an important provision that addresses a problem that we have had for several years. There have been several instances in recent years of a large group of consumers having suffered detrimentally at the hands of regulated firms. The clause will give the FSA the power to obtain redress and compensation more easily. Basically, it allows the FSA, if it thinks that there is a problem, to implement an investigation. If the investigation uncovers a problem, that will then be remedied and a solution will be imposed.
	I can think of two instances in which that provision would have been helpful: the mis-selling of personal pensions in the late 1980s and, more recently, bank charges. The FSA will have the power to do something without having to wait for court action. In addition, clauses 18 to 25 establish a new form of collective proceeding to allow for a new form of class action. I do not want to see the widespread development of such action, as there has been in the United States, so the provision is more tightly drawn. However, it means that, if there is a remedy, a class action can take place and, I hope, the matter can be resolved. That is a new development in UK law and the first example of our allowing group action in the courts for people with similar claims, but it is an important thing to do.

Bob Spink: Has the right hon. Gentleman considered, or will he comment on, the possibility of an opt-out for class actions, rather than an opt-in?

Alistair Darling: We will give the courts the discretion to allow both. I know that there is a lobby outside the House on that point, but people have the right to say, I don't want to come into this, because it might compromise my rights elsewhere, so it is best to let the courts have the discretion to look at the individual merits of the case. No doubt that point can be argued in Committee, however.
	The Bill contains powers to stop the issuing of unsolicited credit card cheques, which has proved very troublesome especially for people who do not have the means to prevent that from happening. We amend the Financial Services Compensation Scheme to allow it to act as an agent for a foreign scheme so that people do not have to go abroad to get their remedy but can go through the UK organisation. There is also a technical change to the recovery of funds when the Banking Act 2009 is used in relation to a failing bank.
	The powers in the Bill are essential; they will enhance and strengthen the supervisory regime. Taken together with the existing powers in the 2009 Act, they go a long way towards having a stronger and more effective regulatory system. As I said, what matters at the end of the day is that we have, not just in this country but across the world, regulators and supervisors who are doing their job. It is vital that those responsible for running financial institutions understand what we are doing. They should not be afraid sometimes to question what is being suggested, but they should be willing to take strong action themselves to ensure that they do not get into the difficulties that we have seen over the past two years. I commend the Bill to the House.

George Osborne: Let me begin by apologising to the Chair for my not being here for the winding-up speeches. I have let the Chancellor and the Liberal Democrat spokesman know about that. In fact, I suspect that not many Members will be here, because although this Bill is supposed to be the centrepiece of the Queen's Speech, it has not exactly grabbed the attention of Parliament. That does not mean, however, that these issues are not very important.
	In the past two years, we have witnessed a catastrophic failure of bank regulation-arguably the greatest failure of financial regulation that this country has ever seen-which has contributed to the longest and deepest recession in this country since the 1930s and a huge loss of national wealth. The exposure of taxpayers to £1 trillion of guarantees and capital support has required them to undertake the largest bank bail-out of any country in the world.
	If we want to understand how completely ignorant the regulatory system was of the problems brewing in the financial system that were about to explode, I suggest that we remind ourselves of the Mansion House speech that the then Chancellor gave on 20 June 2007-just a few days before he became Prime Minister and just a few weeks before the credit crunch began in earnest. I was there; I sat, as I remember, alongside the Financial Secretary to the Treasury, who was here earlier in the debate. We heard the then Chancellor lavish praise on the assembled financiers, making the portentous claim that we were entering what he predicted was
	an era that history will record as the beginnings of a new golden age of the City.
	That turned out to be about as sensible as his golden rule and his gold sales. I think that from the country's point of view, the less the Prime Minister uses the word gold the better.
	Of course, the so-called beginnings of a new golden age were in fact the very end of a huge financial bubble. The regulatory system did not understand what was going on. It believed its own propaganda about a new age of stability that it had created. It did not understand the fragility of the funding models of our major banks, it was completely ignorant of the risks being run with leverage, and it was drastically ill prepared for what was about to happen.

Barry Sheerman: I have been to several meetings in the City at which the hon. Gentleman has spoken. Could we have a look at some of his speeches from about the same period, which I remember also included glowing endorsements of the City?

George Osborne: I am not claiming that anyone in the House fully understood what was going to happen. However, I did warn in 2006-I do not remember a single member of the Government saying this-that an economy built on debt is an economy built on borrowed time. The hon. Gentleman might remember-he probably put them in his election address-all those claims about having abolished boom and bust and the economic cycle, about how Britain was better prepared and how this was a new age of stability. If he does not remember, let me reassure him that over the next few months we will be reminding him and his constituents of all the things that were said.
	The crucial point is that such was the regulatory regime of our banking system, and these were the people who were supposed to understand the risks that were being run. Although it is true, as of course the Chancellor said, that other countries have experienced some very severe problems with their banking sectors-the United States, the Netherlands, Belgium and so on-there are also examples of banking regulatory regimes that got it right. The Spanish banks are in much better shape than the British banks because the Spanish central bank banned some of the off-balance-sheet vehicles that became prolific in this country. The Canadian central bank imposed a leverage backstop, which was never considered here. The Australians, whose central bank pursued a twin peaks model of regulation, still have four double-A rated banks. There are examples of banking systems that got it right, while it is generally accepted that Britain's was the most exposed. Indeed, this morning we heard that Canada has come out of recession, which means that Britain is the last country in the G20 still in recession. That shows how exposed we have been.

Sally Keeble: I agree with the hon. Gentleman that there are genuine issues about people not spotting what was coming. However, the Bill is partly about supervision and regulation. In all the hearings with the Governor, I do not remember him sending out clear warnings about what was happening. There was general discussion of debt, but I do not recall people talking about the exact mechanisms that caused the problems. That is partly why I think that maintaining the FSA-of course, it has had its problems-is the right way to proceed instead of going back to a system that was itself somewhat flawed.

George Osborne: The hon. Lady might remember the words of a previous shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), who spoke for my party during the passage of the Bill that became the Bank of England Act 1998:
	With the removal of banking control to the Financial Services Authority...it is difficult to see how and whether the Bank remains, as it surely must, responsible for ensuring the liquidity of the banking system and preventing systemic collapse.-[ Official Report, 11 November 1997; Vol. 300, c. 731.]

Sally Keeble: I would not dispute what are clearly the facts. My concern is that the hon. Gentleman-the right hon. Gentleman-is proposing that supervision and regulation should go back to the Bank of England. I saw no evidence that more warnings came from the Bank about the crisis that was brewing than came from the FSA.

George Osborne: The hon. Lady was right first time-I am an hon. Gentleman, not a right hon. Gentleman.
	I am not claiming that the Bank of England got it right; I have said so in private at the Bank as well as in public. However, it did warn-not often enough, not loud enough, and certainly not much listened to by anyone-that, for example, the housing boom was developing at a pace that was beginning to alarm it.
	Let me explain why I think that a change in the structure of regulation, as well as its content, would help. After everything that we have been through, it is pretty remarkable that the Government are not asking some big fundamental questions about the structure of regulation that they set up. Almost every other country in the world is proposing considerable changes to its regulatory structure. As far as I am aware, only in this country, of all the major economies that had a banking crisis, are the Government content to stick with the existing system. Of course, we know exactly why that is. Everyone knows that if Labour Members were in opposition or were not currently led by the man who was Chancellor when the system was introduced, they too would be looking at changes to the structure of regulation. They are wedded to defending the current system because it happened to be introduced by the man who leads them. The proposal was developed, completely in secret, in opposition. It was, I believe, kept in a safe in the hotel bedroom of the hon. Member for Coventry, North-West (Mr. Robinson), and deployed, without any warning, two or three days after the general election. The then Governor of the Bank of England, the late Eddie George, almost resigned as a result. There was then a hasty consultation and the measure was introduced. We are now stuck with the Government defending this system for the simple reason that the Prime Minister thinks that there will be some reputational damage to him if he admits that it has not worked very well. I have to tell him that the reputational damage has already been done.

Geoffrey Robinson: rose-

George Osborne: We are about to get the codes to the safe.

Geoffrey Robinson: May I just deal with the point about the late Eddie George's attitude? I was in on most of the meetings at that time-of course, the then Chancellor was in on more of them-but when the issue of the Bank of England's overall responsibility for systemic integrity was discussed, the then Governor's principal concern was that he would have enough money to deal with that, and to inject liquidity where necessary. He had in mind a ridiculously small amount of money at the time, and we gave it to him. On that basis, so long as he was left with that responsibility and had the money he thought necessary, he went along with the proposal and indeed welcomed it in subsequent speeches.

George Osborne: This is not particularly fair to the late Eddie George as he is not here; however, I, too, had several conversations with him about precisely what happened. My conversation with him seems to have been somewhat different from the one the hon. Gentleman had. The Bank of England was not consulted, and this fundamental proposal was made on the future supervision of banking. Given that we are discussing, 12 years later, the biggest failure of banking supervision, it is worth going back to that moment.
	One of the reasons why I-as the current shadow Chancellor, who hopes to be in the Chancellor's job in a few months' time-have decided to publish our proposals and make a big effort to consult on them and talk to as many people as possible, including the three different parts of the tripartite regime, is precisely so that I can get my thinking right in opposition, rather than just deploying the whole thing two days after a general election, which I could of course do, following the previous model. I will come to the structure of our proposal, but also to why we think it is necessary. I will deal later with the content of regulation because I completely agree with the Chancellor that that is very important as well, but we have to look at the structure of the regulator.
	We have a tripartite regime under which no one knows who is in charge and who is giving official policy. We have a Governor of the Bank of England who regularly gives interesting speeches-at Mansion House, and in Edinburgh recently; he also gave evidence to the Treasury Committee last week-on how he thinks banks should be regulated. His views are very interesting but they bear absolutely no resemblance to official Government policy as just stated at the Dispatch Box. We have a chairman of the FSA, a man of great integrity and intelligence, who says that quite a lot of the activities of the banking sector are socially useless. I do not know whether the Chancellor of the Exchequer or the Prime Minister share that view, but it has certainly been noticed not just in the City but around the world. And we have a Prime Minister who turns up at the fag end of the G20 Finance Ministers meeting and announces to a completely stunned audience-no doubt including the Chancellor-that he is in favour, suddenly, of a Tobin tax. The United States Treasury Secretary then has to give an immediate reaction to that view, and of course rubbishes it.
	So those who would ask What's the view on financial services from the UK authorities? would get three or four completely different views; that is how dysfunctional the current relationship is. The Chancellor deals with it much more than I do, but even my own dealings with the different legs of the tripartite regime-one group of people told me something completely different from the previous group who came to my office-suggest to me that this relationship is not working particularly well.
	The answer to all this is apparently contained in clause 1, which I remind the House says:
	There is to be a Council for Financial Stability, consisting of...the Chancellor of the Exchequer...the chair of the FSA, and...the Governor of the Bank of England.
	The Chancellor will be the chair of the council, which will
	keep under review matters affecting the stability of the UK financial system.
	That is what the great change is supposed to be: a Council for Financial Stability consisting of the Chancellor, the FSA and the Governor. I did a little bit of research, and the memorandum of understanding that originally created the tripartite regime created a standing committee-not a council-on financial stability, which
	is chaired by the Treasury and comprises representatives of the Treasury, the Bank and the FSA. It is an important channel for exchanging information on threats to UK financial stability.
	Unless Members can explain to me the fundamental difference between a council and a standing committee, it is not clear what this Bill achieves regarding the regulatory structure. Indeed, the only difference I can spot is that, according to the memorandum of understanding, at least the standing committee was required to meet once a month. According to the Bill, the Council for Financial Stability will be required to meet only four times a year, so the number of required statutory meetings has actually been reduced.
	Nor is the Chancellor required to turn up to the council. Perhaps the Chancellor can confirm this for me, but I think that in the entire period when his predecessor was Chancellor-10 years: the longest time that anyone had been Chancellor for a century-he never once physically attended the tripartite committee. There was one joint telephone conversation with the US authorities and the US Treasury Secretary; that was the only time the then Chancellor took part in the meetings of the tripartite committee-on the telephone. So it is not exactly clear how this proposal will fundamentally change things.

Geoffrey Robinson: We do not want this Second Reading debate to become a Committee stage debate, but will the shadow Chancellor kindly explain to the House precisely how his new arrangement is going to work, involving as it does, as I understand it, a block transfer of the FSA and its head into the Treasury? Therefore, the chair of the FSA and all its huge responsibilities will be subject to the Governor of the Bank of England, and the FSA will have no chance to make its own representations separately or legitly to the Treasury, with whom ultimately the real responsibility in a crisis would reside. The hon. Gentleman has been talking about relationships. How is the relationship going to work between, presumably, the head of the FSA and Governor?

George Osborne: If the hon. Gentleman will allow me, I will come to that in just a couple of minutes.
	I want to put on the record what some other people, not just the Conservative party, have said about the proposals in the Bill. The Treasury Committee, chaired by the right hon. Member for West Dunbartonshire (John McFall), said that the proposals are a largely cosmetic measure, and that
	merely rebranding the Tripartite Standing Committee will do little in itself.
	The Association of British Insurers, one of the big represented bodies, says:
	What is not clear from the Government's proposals is how the proposed Council for Financial Stability would actually operate or what powers it would have to require the FSA and the Bank of England to pursue particular policies.
	Indeed, the ABI says that clause 5, which gives the FSA explicit responsibility for financial stability-just months after the last banking Bill gave the same explicit responsibility to the Bank of England-will
	exacerbate the confusion of responsibility between the Bank and the FSA.
	Indeed, the Chancellor did not address the elephant in the room: the views of Mervyn King, the Governor of the Bank, who said this to the Select Committee:
	We were given a statutory responsibility for financial stability in the Banking Act, and the question I put to you...to which I have not really received any adequate answer from anywhere, was: what exactly is it that people expect the Bank of England to do? All we can do at present, before a bank is deemed by the FSA to have failed, is to write our Financial Stability Report and give speeches.
	The Chancellor mentioned the new power concerning financial stability that he has given the Bank of England, but its Governor-the other member of this tripartite arrangement-came before our Select Committee and said that he does not have a clue what the Chancellor expects him to do with it.
	It is for these reasons that we have decided that we will need new legislation to bring in a new structure of financial regulation. I have to be absolutely honest with this House: it is not something we particularly wanted to do. There are quite a few economic issues that we are likely to confront if we form a Government, and revisiting financial services regulation was not at the top of our list. However, we honestly came to the view that we would have to do it, because we have to create a system that gives a clearer idea of who is in charge, and that ends these dysfunctional squabbles between the three institutions; a system under which the people in charge can exercise judgment and discretion, and through which the connection is made between the broader risks across the economy and the individual risks to individual firms. As I have said, we have spoken to many market participants and at length to the different legs of the tripartite arrangements, and we believe that that can best be done by putting the Bank of England in charge of the prudential supervision of banks, building societies and other significant institutions.
	Surely we have now learned the hard way that we cannot take central banking out of bank regulation, and we cannot judge systemic risk without understanding institutional risk and vice versa. Of course the changes will require new, more collegiate arrangements for the Bank of England, but that, too, is a good thing. There is currently a rather unbalanced Bank of England that is collegiate on monetary policy and quite imperial on financial policy, of which the Chancellor no doubt bears the scars. We therefore propose a more collegiate approach. The whole point is to ensure that monetary policy, the supervision of financial stability and the regulation of individual institutions are better co-ordinated.
	When we discussed these matters in TV studios and the like, the Chancellor used to say that no one in the world was proposing to do what we were. Of course, he does not say that any more-I shall come on to his current argument-because he knows that it is not the case. Across the world, countries are coming to the same conclusion that we did. I mentioned Stan Fischer, the governor of the Bank of Israel, and it is worth remembering his reason for what he said. He did not just say:
	It is very likely that prudential supervision will return to central banks when the lessons of this crisis are drawn.
	He also said at Jackson Hole, at the conference of central bank governors:
	Information flows are critical, and the plain fact is that information flows more readily within an organisation than between organisations-which is one of the reasons to have prudential supervision within the central bank.
	That is a former chief economist of the World Bank and first deputy managing director of the International Monetary Fund, currently a central bank governor, and his view is shared by a whole host of other people. Another example is the current governor of the Bank of France, who said:
	Indeed, one of the main lessons of the crisis may be that those countries where central banks assume banking supervision took advantage of their ability to react quickly and flexibly to emergency situations.
	I have already quoted what Jacques de Larosière has said explicitly about the Conservative proposals-that he supports them. The Bundesbank in Germany is now taking control of prudential regulation of banking, and the Belgian central bank is doing the same.
	In the United States, the Federal Reserve is seeking to take control of the prudential regulation of important systemic institutions. The Chancellor often says that there are many regulators in the US, and of course there are powerful vested interests behind the Chicago regulator and the like. However, I remind him of what one of President Obama's chief economic advisers, Austan Goolsbee, said earlier this month-that separating banking supervision from central banking meant that a country would
	get into a 'left hand doesn't know what the right hand is doing' kind of problem in a crisis.
	When asked to give an example, he cited the UK. That was one of the chief economic advisers of the President of the United States citing the UK as an example of a place where there had been a lot of co-ordination problems.

Geoffrey Robinson: I do not wish to labour the point too much, but the problem was not that the left hand did not know what the right hand was doing but that neither hand knew what was going on. That is not a problem of co-ordination or integration. I saw the right hon. Member for West Dorset (Mr. Letwin) nodding vigorously at the idea that information flows more easily within an organisation than between two organisations, but the logic of that is that we should merge the whole of government so that we could get information more freely. In reality, it simply is not true. There are some natural divisions where it is better to have the inevitable squabbles between organisations out in the open, so that we can all take a view on them. The Treasury should have access to two different sources: one handling monetary policy, a huge responsibility, and the other with the massive responsibility of prudential regulation. Bringing them together will not solve the problem.

George Osborne: Do I believe that there is a perfect system of banking regulation? No, I do not. Do I think that all banking crises can be avoided in future? No, I do not. Do I think that we can abolish boom and bust? No, but I believe that we can create a more functional arrangement than there is at the moment. I am sure that the hon. Gentleman has seen that the current relationship is dysfunctional, and I have experienced that at first hand in my meetings with the three parts of the tripartite arrangement. If countries all over the world are learning the lesson that central banks have to be deeply involved in prudential supervision, we should learn it in the UK.

Alistair Darling: I am listening to what the hon. Gentleman says about America and the various things that have been said there, but the fact is the American Government are not proposing to merge all their regulatory bodies, because they recognise that there are practical difficulties. For everyone who says that the Fed ought to be more intimately involved in regulation, there are other people saying that it should not, and the American Government are simply not doing that. I do not understand his argument that simply by reversing the FSA into the Bank of England, all the problems that we have been talking about would not have happened. I just do not accept that.
	I noted what the hon. Gentleman said about what Governors say, and as long as they are independent of Government, they will say what they want. I presume he is not proposing that, were he to get into power, the Governor of the day could not say what he thought.

George Osborne: Of course the US is not creating a single regulator in the Federal Reserve, and as the Chancellor well knows, one of the major reasons for that is the enormous vested interests that stand behind the insurance regulator in New York, the derivatives regulator in Chicago and so on. The congressional obstacles to even attempting to come up with such a plan would be insurmountable. However, the US Government are proposing-and already facing quite a battle in Congress-to give the Federal Reserve prudential supervision powers over the largest and most systemically important banks. In the United States, of course, there are many thousands of banks, whereas in the United Kingdom there are many fewer than that. The US Administration have decided that the Federal Reserve needs to be involved in the prudential regulation of banks.
	I have never claimed that our changes will solve all the problems, but they will at least remove the pretty substantial problem of a dysfunctional regulatory arrangement in which it is not clear that there is speedy co-ordination of action. There are huge institutional jealousies and, as the Chancellor has no doubt experienced at first hand, there are dysfunctional relationships.
	We are trying to get this right, and we understand that the biggest challenge is the transition. We are therefore making a huge effort, and we have created a consultant board with people at a working level in the industry. I have the help of the former managing director for financial policy at the Treasury, who is directly helping me on devising the plan. I recently went to speak to the senior management of the FSA about it and, because of the constitutional arrangements, I am now in direct discussion with the Chancellor's officials about how to get it right.
	I am very conscious that we need to get the transition right and, in the end, the decision that I faced was twofold. The first question was whether I believed the change had to be made, and I came to the view that it did. The second was whether I should then keep my decision secret, as the previous shadow Chancellor who became Chancellor did. I thought that, in the end, that was part of the problem that we are dealing with today.
	There are some perfectly reasonable proposals in the Bill on the content of regulation. Having recovery and resolution plans, which are contained in clause 12, is a good idea. However, I spoke last week to the chairman of one of our largest banks, who has often made accurate observations about what is going on, and he made the point that the situation is already turning into a bureaucratic nightmare and that sight is being lost of what the living will concept should be about. There is a simple, clearly understood plan for dealing with a collapse of that particular institution, but he thinks that it will become an enormous bureaucratic operation, which will lose its clarity.
	We welcome the new powers in clause 13 to curtail market abuse and those in clause 14 to suspend and penalise individual market practitioners. I suspect that the issue is whether there is an appetite to use those powers. It is worth bearing in mind the observations of the former Director of Public Prosecutions, who said:
	Our system for regulating markets and for prosecuting market crime is completely broken. In Britain, no one has any confidence that fraud in the banks will be prosecuted as crime.
	I emphasise that the former Director of Public Prosecutions said that.
	We support the restriction on the provision of credit card cheques in clause 27, although I agree with the consumer group, Which?. It said last week that
	we are disappointed that the Government has not taken further measures against irresponsible lending in the Bill.
	One of the institutional changes that we shall make is creating a consumer protection agency that will bring together the consumer-regulating powers of the Financial Services Authority and the consumer-credit powers of the Office for Fair Trading in a single body. That will be a powerful new agency.
	The Chancellor briefed the press about the clauses on bonuses with enthusiasm. Perhaps he can assure us, as the Bill begins its passage-it is the first day of debate-that he is confident about the legality of clause 9. I cannot help noticing that the former Lord Chief Justice, Lord Woolf, has already started to ask questions about its legality. It would therefore be good-perhaps it could be done in Committee-to have some answers from the Government now rather than waiting for a year to pass, after which some court strikes down the provision. We need to address Lord Woolf's remarks and concerns.
	On bonuses more generally, we made our proposals about the coming year end. I simply remind the House that the Prime Minister promised the country that the days of the big bonuses are over. We wait and see whether that particular Prime ministerial promise will be fulfilled in the coming months.
	The Bill contains some perfectly reasonable clauses, but it does not address the central issues, which the Governor of the Bank of England asked it to tackle-first at the Mansion House, then in Edinburgh and last week at the Treasury Committee. He said that the Government's provisions in the two previous banking Bills and two White Papers amount to little real reform. He challenges us all to address what he calls the
	too big to fail issue.
	He is right to challenge us about that. My view is that some of the riskiest investment banking activities, such as large-scale proprietary trading, do not sit easily with retail deposit taking. However, I also take the unashamedly pragmatic view that any structural solution to the problem should be enforced internationally. In the meantime, we should use capital rules to provide new safeguards.

Sally Keeble: The hon. Gentleman refers to changes in the structures. There was always a financial stability power or function, though one could say that it was not used. There has been much discussion of the holy grail of the macro-prudential tool to go with the financial stability function. Has he identified such a tool, other than capital ratios? Who would operate it? That seems to be the missing bit, about which the Governor of the Bank of England has been talking.

George Osborne: I happen to believe that the main tools are capital ratios, which operate as far as possible counter-cyclically-or at least not pro-cyclically, as they seem to do at the moment-and that the standards should be set internationally through Basel, the Financial Stability Board and so on. If that can be achieved internationally in the next few months, we should get on and do it. A bit of a risk is emerging-we are applying capital rules in a pro-cyclical way and risking a second credit crunch in the next few months. That deserves closer observation. The most useful thing that could emerge from the G20 process is some sort of international agreement on capital rules. We should want London, Edinburgh and so on to be homes of globally successful financial businesses. We want Britain to be the home of wholesale financial services in Europe, but we also want to protect the British taxpayer. The best way in which we can do that through macro-prudential tools and capital rules is by trying to achieve some international standards. I therefore agree with some of the public comments that the Chancellor made about what we want to achieve through the forums I mentioned.
	However, there are some worrying developments. The Chancellor talked about some of the European proposals. It is not clear that the alternative investment fund managers directive as drafted is in the UK's national interest. It will drive the hedge fund industry-at least, significant parts of it-to Zurich. I think that the Government have finally woken up to that and are fighting a bit of a rearguard action. The Chancellor raised national sovereignty or the right of a national Government to have their say about whether there should be financial support, and I completely agree with him. However, the conclusions of ECOFIN do not seem to be replicated in the documents that have been produced. Those matters require the Government to be extremely active and aggressive in fighting for the UK's interests and trying to get an international or European playing field that is in this country's national interest. I think that the Treasury could present its arguments more aggressively.

William Cash: rose-

George Osborne: Just before I give in- [Laughter.] That is an appropriate remark given that my hon. Friend wishes to intervene.

William Cash: I am sure that my hon. Friend will not in any way give in on my point, but I hope that he will at least take serious account of it-I have raised it with him many times. It comes back to what I put to the Chancellor: in a situation in which majority voting prevails, if the architecture and the final decision-in other words, the control rather than who is in charge-turns on the European structure, does my hon. Friend agree that we must show today and in our debate in a couple of days that we will not fall for the argument that we do better through the City of London being in the European architecture? Majority voting means that we will be consistently outvoted. That is where the power lies and I hope that my hon. Friend accepts that that is a serious matter which needs to be considered.

George Osborne: I agree that, having established the red lines, we need to make their existence clear in the directives and new institutional arrangements. I want the Chancellor to insist-because the issue may arise before the election-on his view that national Governments must have the final say, with the right of veto, over the decision to commit national taxpayers' resources to supporting a bank.
	I must also note that allowing the French to take the Commission job on financial services, for which they were clearly bidding from the beginning and was doubtless part of the horse-trading that ended in some of the other Commission arrangements, may turn out to be a serious diplomatic mistake. One goes only on the briefings in newspapers, but as far as I understand it, the Prime Minister and Lord Mandelson were against the appointment, we were told that it would not happen and that the President of the Commission would split the jobs. Then, lo and behold, Monsieur Barnier emerges as the person in the Commission responsible for financial services. There is an understandable French objective to get some wholesale financial services to France and away from Britain. I am not sure that that is in the UK's national interest. Perhaps one day, in the Chancellor's memoirs-the bits that are not in the Bill; let us hope that there are more interesting bits-he will explain exactly how it all came about.
	Let me draw my remarks to a close with a final observation. Of course, the route to protecting the British taxpayer will never be some new banking Bill or a new European directive. What we need to deal with are the root causes of the credit crunch, and those are the huge macro-imbalances in our economy. We were not the only country in the world with those imbalances, but they were worse here than anywhere else. Lord Turner put well it in his report when he said that
	rapid credit expansion was underpinned by major and continued macro-imbalances, with the UK-like the US-running a large current account deficit.
	The truth is our households were more indebted, our banks were more leveraged, our housing boom was greater and our Government budget deficit was larger than almost any other country in the world. The extraordinary thing is that the then Chancellor thought that this period was one of stability and an end to boom and bust. We are living with the consequences of that hubris today. It is why Britain is the last country in the G20 to still be in recession.
	So this Financial Services Bill is tinkering at the edges. We need to end the dysfunctional tripartite regime; we need a new system of regulation that puts the Bank of England in charge; we need to address the issues that the Governor of the Bank has raised; and we need an international regime better to protect taxpayers while ensuring that Britain remains competitive. Above all, we need to move from an economy built on debt and highly dependent on the success of financial services to an economy built on savings that is home to successful financial services and to other successful industries. This Bill cannot do that, and nor can this Government. That is why we need a new Government and, eventually, a new Bill.

Vincent Cable: The legislation before us today is substantial, unlike some of the other legislation listed in the Queen's Speech, and it deserves detailed attention. There is much in it with which I would agree, but we need to examine whether it is all necessary, and what is omitted from it. I will probably devote more of my remarks to the latter part of the Chancellor's speech, in which he properly addressed consumer protection issues; although I agreed with much of what the hon. Member for Tatton (Mr. Osborne) said, I noted that in his 40-minute speech he did not refer once to the consumer issues, which are actually rather important.
	The Chancellor started with the big picture, and I have several broad points to make about that. We now have relative stability in the banking system after its collapse and its rescue by the taxpayers. I do not wish to repeat the history lesson that we have already had, but if people wish to read my version of it, the paperback edition will appear in the new year. It is a long story and many people were to blame, as were the leverage, the excessive complexity, the failures of regulation and so on. Although the situation has stabilised as a result of Government intervention, there is still serious risk in the system, and we have been reminded in the last few days of the potential risks for some major banks that can arise from one operator-in this case, Dubai World-going bust. There could be others out there. If there is a double-dip recession in our own economy or elsewhere-that is possible, but I am not predicting it-it will produce another round of bad debts. There are almost certainly problems with the overvaluation of the UK housing market and other asset bubbles which will appear, in turn, in the bad debts within the banking system. Many of those problems are not only historical problems, but potential problems.
	Secondly, the big failure-as I have told the Chancellor many times-is not primarily a legislative issue but the reluctance of the Government to follow through on their ownership and control of leading banks in terms of influencing their lending policy. We had a good reminder of that last week when RBS, a nationalised bank, was able to mobilise hundreds of millions of pounds in support of an aggressive takeover of Cadbury by Kraft-as it happens, the world has moved on-while having to acknowledge publicly that it would not, by a very long way, meet its net lending obligations to small and medium companies. There has been a failure of governance by UKFI, the state directors-a failure to ensure that RBS and other state institutions meet the test of national interest. They are clearly not meeting that test.
	The third general issue, which was touched on by the Chancellor and the shadow Chancellor, concerns the structural problems. I do not want to reopen the argument about whether the banks should be broken up or not-I will leave the Chancellor to debate that with the Governor of the Bank of England, who happens to share my views on that point. Several pragmatic steps are being taken, such as the living wills proposals, the build-up of revised capital adequacy rules, which take account of very large institutions that are too big to fail and too big to save, and trying to put over-the-counter transactions on to traded markets. All those things would reduce the risk of a too big to fail collapse and they are all very sensible. However, most of them depend on international agreement, which could take years to happen and may well never happen.
	Perhaps I could invite the Chancellor to say whether he agrees with an alternative proposal. He may not wish to break up the banks, but as long as they remain dependent on the taxpayer guarantee, would it not be right and sensible to ask them to pay for it? I think that that is what the Prime Minister was trying to suggest to the G20 meeting until he got fixated on a slightly more populist line on the Tobin tax. I think that he shares our view that the banks need to pay some kind of fee for this continuing guarantee, until the too big to fail problem has been resolved-however that happens.
	On the specifics of the legislation, I turn first to the tripartite structure. It is worth quoting the Treasury Committee, which agreed on an all-party basis when it first looked into this problem. It said:
	Although we have concerns about the operation of the tripartite system, we do not believe that the financial system in the United Kingdom would be well served by a dismantling of the tripartite system. Instead, we wish to see it reformed with clearer leadership and stronger powers.
	There are stronger powers in this Bill; the hon. Member for Tatton spoke on this point at length. I sense that there is confusion between two different issues here. One is the need for clear leadership-about which the hon. Gentleman is right-and, in relation to systemic stability, that leadership should be with the Bank of England. It is not clear that such leadership exists in the current council, because powers remain evenly distributed.
	There is a difference between the issue of leadership and that of the structuring of the bureaucracy; that is the point that the hon. Member for Coventry, North-West (Mr. Robinson) raised earlier. I cannot believe that the hon. Member for Tatton can talk to people in the City-as he does a lot, and as I do-and not know that they are deeply uncomfortable with what he is proposing. I have met many deep-dyed Conservatives-who are smacking their lips at the prospect of an incoming Conservative Government cutting their taxes-who are horrified by the proposals to change the arrangements for the FSA and the Bank of England. They advance several arguments against those changes.
	First, those people say that the proposals are causing enormous uncertainty. Staff at the FSA do not know whether they will have a job in six months or a year, they have taken their eye off the ball and are not concentrating on issues of regulation and supervision at a particularly delicate stage. I do not know where the hon. Gentleman has got the idea that the Governor of the Bank of England wants to be the supervisor of the Loughborough building society and many other institutions.
	If the hon. Member for Tatton has ever had a meeting with the Governor, he must surely have realised that that is the last thing he wants to do, and that it would be a complete distraction from his primary responsibilities. It would also lead to duplication. The moment that integrated teams of people started working on the insurance industry-not a controversial area at the moment-some of the people would be hived off to the Bank of England and the others would be hived off into another institution and, presumably, there would be two sets of insurance regulators instead of one. That is potentially very disruptive and confusing, and it is clear to me that people in the City do not want that reform.
	I think that I am the only person in the House, with the possible exception of the right hon. Member for West Dorset (Mr. Letwin), who took part in the agonising process of legislating for the original Financial Services and Markets Bill back in 1999-2000. It was a terrible process, and I would hate to think that an incoming Government, if one were formed by the Conservatives, would inflict on us a similar piece of legislation. It is not necessary. There is one specific issue on which they are right, which is the need for clear unambiguous responsibility for systemic stability to be given to the Governor of the Bank of England. That needs to be there and it needs to be clear, but it does not require a vast moving around of the whole apparatus of the various quangos and all the people in them, which is completely unnecessary.
	The second big issue in the Bill concerns remuneration. My question is whether such legislation is necessary. Some of the things suggested seem perfectly sensible, but do we need legislation to bring them about? As I understand it, the basic principles are set out in the FSA code of practice, which was quite a weak document, introducing guidance rather than principles and removing a lot of companies from its arrangements. I would simply ask the Chancellor whether it is possible to ensure that remuneration practices are tightened up by issuing a fresh code of conduct through the FSA or through secondary or devolved legislation. Why enact primary legislation to deal with the matter, given that the FSA already has considerable powers?
	Why do the Government not use the direct powers that they already have, through the semi-nationalised industries? There was an embarrassing episode a few weeks ago when it was announced that the Royal Bank of Scotland would remunerate its highly paid staff in deferred stock, and that they would not be paid for three years. It then emerged-that is, RBS admitted-that the bank would pay its staff in cash next year, which means that there was a straightforward failure of direction by the Government's directors in the banks. We do not need legislation to sort out those problems.
	The other issue under the heading of remuneration-the Chancellor indicated that he would deal with this through a separate order-is the implementation of the Walker review. It has to be said-I am sure that this is true even among his departmental colleagues-that there was incredible embarrassment, in the Government and elsewhere, at the whitewash that Sir David Walker has produced on disclosure. The idea that what he calls high-end staff who are highly paid should not be individually identified is a very strange one, because we already have explicit exposure in several cases.
	All the pay, bonus payments and pension arrangements of directors of public companies are declared in an annual report. Even with unquoted companies, any director paid more than £200,000 a year has to be publicly declared. We have a situation, which the Government seem to have accepted, whereby if someone is paid £250,000 as, say, the finance director of a middle-sized metal-bashing company, all their details have to be publicly declared. However, if they are in a bank, not only do their individual details not have to be declared, but their existence does not have to be acknowledged. That is an extraordinary state of affairs, given that banks are underwritten by the taxpayer.

Charles Walker: Surely the difference is that there can be high earners in banks who do not hold any executive position, whereas the example to which the hon. Gentleman referred is of someone on the board of a private company.

Vincent Cable: That, indeed, is the point. Why should people who have highly paid positions in private banks, but who do not sit in either an executive or a non-executive role on a board, not be declared? Why should such disclosure be limited to directors alone, whether executive or non-executive? The principle of disclosure has already been accepted, and the kind of arguments that I have heard from some people in the investment banks-We don't want to be identified because there's a security issue-apply just as much to the directors of those other companies. Sir David Walker has produced an embarrassing mouse of a report that has clearly embarrassed the City Minister. I hope that when the Chancellor produces his revised direction-I am not sure what status that document has-he will take that fully into account.
	Thirdly, it seemed to me that what the Chancellor said about short selling was right and appropriate, and that the changes to the legislation are exactly as they should be. We should not have a completely dogmatic, fundamentalist opposition to short selling. Short selling-dealing in stock that one does not own-may have a perfectly legitimate role in certain markets. However, there is a particular problem with banks, because banks' reserve capital-their regulatory capital-depends on share capital, which depends on the share price, and if the share price is manipulated as a result of short selling, that brings the taxpayer directly into the frame. That means that people are, in effect, gambling against the taxpayer, which is not right. It is also dangerous, and it is quite right that there should be strong regulatory powers to govern it.
	Fourthly and finally, the consumer issues are important. Several of the consumer provisions in the Bill are sensible and helpful. There is the class action to avoid large numbers of people having to go to the Financial Ombudsman Service. The Chancellor cited the case of pension mis-selling, and I would guess that the same applies to payment protection insurance. There are many examples of how the procedure could be simplified, and it is good that there are to be stronger disciplinary powers for the FSA.
	The idea of having a centre for financial education is also helpful, in bringing together the different strands of activity in financial education. It is not yet clear where the money will come from, whether the centre will be independent or what the governance structure will be, but no doubt that will emerge in Committee. It is also useful to have proposed action on credit card cheques, which have been the subject of some abuse in the past. I am not quite sure what future such cheques have, because my understanding is that banks will stop using and transacting cheques. Indeed, I am not sure whether such cheques will exist in future, so perhaps we need some clarification there.
	There have been some helpful submissions in the past few days from the citizens advice bureaux and the Consumers Association, listing a whole lot of other provisions. They make the point that if the Bill is to be a round-up of useful consumer actions, why are those other things not being considered as well? There are about a dozen suggestions, but I will list only what seem to be the most important. First, there is the issue of contingent charges. Since the court ruling last week that legitimised what the banks have been doing in imposing what many regard as unfair charges on overdrafts and other things, is it not now necessary to straighten out the law? It would appear that the court ruling was based on a narrow point of law rather than an issue of principle. Should not this Bill be used to sort out that problem? There are hundreds of thousands of people, if not millions, who have lost money as a result of those unfair charges and who feel a strong grievance about it.
	There is also the issue of set-offs. People are finding that if they put money into a deposit, that money is directly deducted from their outstanding loans. In effect, the banks are appointing themselves as preferred creditors, which is fundamentally wrong and unfair to the consumer. There are also issues such as unauthorised and unsolicited overdraft limits being raised unilaterally, without any consultation with consumers. Then there is the issue of the repossession of the properties of landlords-a matter in which the Government have been actively involved in the past. I had understood that the Bill would be a vehicle for strengthening legal protection for victims of repossession in such cases.
	There is also the unilateral re-pricing of debt by many banks in respect of their outstanding loans, and the changing of minimum payments on credit charges at the discretion of the banks. There are many such practices, although I do not know-I am not a parliamentary draftsman-whether new laws are necessary to deal with them. What would be helpful-I make this as a practical suggestion-is if the Government could indicate which of the many proposals being made by the various consumer protection bodies are covered by the FSA, by the Office of Fair Trading or by both, which can be dealt with through secondary or devolved legislation, and which require primary legislation, so that we can understand how consumer protection in banking and finance can be brought up to date and up to scratch.

William Cash: In the context of the various tiers and hierarchies of legal intervention that exist, the hon. Gentleman's pursuit of the simplicity that he set out at the beginning of his remarks, and his desire not to have too much duplication, would he concede that it would be far better if the matters to which he has referred did not end up being adjudicated in, for example, the European Court of Justice? The decisions to which he has referred would then all be adjudicated under a series of directives that would ultimately take control away from our courts and hand it over to the ECJ. Does he not see the inconsistency in his argument?

Vincent Cable: I do, but one of the problems is that what often happens if there is inadequate consumer protection in the UK and the Government do nothing about it is that European parliamentarians then try to bring in new rules at European level, and try to deal with the problem by putting it in a single market context. I do not think that the consumer protection aspects are predominantly a European industry.
	To summarise, there is much in the Bill that is perfectly sensible. However, I would question whether some of it is strictly necessary-and if the Government are to embark on a wholesale review of the current deficiencies in consumer protection in respect of banks, quite a few key items are missing.

Geoffrey Robinson: In common with the shadow Chancellor, I would like to apologise for being unable to attend for the concluding speeches. It is a great pleasure, as always, to follow the hon. Member for Twickenham (Dr. Cable). I am pleased that he has given a general welcome to much in the Bill. Having read the Bill and on listening to today's speeches, it strikes me that a great deal will be left for the Committee stage, which is likely to involve debate on detailed complicated amendments-both wrecking and others-so I am bitterly disappointed that I have not been invited to sit on it.  [Interruption.] I am sure that those who do have that honour and pleasure will keep me well informed about the progress they are making. I look forward to hearing that some of the problems I foresee-on short selling and on other issues raised by the hon. Gentleman-are resolved at that stage.
	It seemed to me that even the shadow Chancellor, if we put aside his polemics, was broadly in agreement with the provisions and measures-certainly the objectives-in the Bill. One point on which he rather doggedly nailed his colours, his prestige and his personal pride to the mast-Labour and Liberal Democrat Members do not understand his reason for doing so-was in respect of the merger, or indeed the subordination, of the Financial Services Authority and its functions to the Governor of the Bank of England, who clearly does not want that role; at least, he has not made that clear to me yet.

Andrew Smith: Does my hon. Friend agree that the shadow Chancellor was deeply unconvincing in putting forward his arguments? As I listened to him, I wondered whether he was not in a sense giving the game away. He used a double-edged political sword against us. He said that we were defending the existing arrangements because of the Prime Minister's role in their genesis, but it sounded to me as if he was attacking them precisely because of the Prime Minister's role. Is there anything in that?

Geoffrey Robinson: There is a great deal in that. Certainly in the early stages, when the shadow Chancellor first came up with his idea of getting rid of the FSA and spoke in hostile tones about it, he adopted a minatory posture towards all and sundry in the City and elsewhere. On that, I agree with my right hon. Friend. However, today he seemed to be emollience personified and there was nobody in the world more reasonable than the shadow Chancellor. He was bending over backwards to accommodate everybody; he was negotiating with everybody and consulting everybody; his offices were full of representatives from the City; the FSA was coming in and the insurance industries and bankers were coming in-and, of course, the Governor of the Bank of England had a special place there. The shadow Chancellor would have us believe that the whole financial world agrees with him, and he quoted one or two examples of people moving tentatively, although not fully, in that direction. The situation is anything but, of course.

Mark Todd: Does my hon. Friend agree about another problematic element in the shadow Chancellor's speech? He referred to the sensible action by some of the people he spoke to, in their giving some kind words to his thoughts, in the possible prospect of the hon. Gentleman being in a position to deliver a package of change in the future. Those in the FSA in particular may well be considering carefully how to position themselves in relation to the Opposition party and may at least be putting forward some words of insurance because of the circumstances that might develop next year, although my hon. Friend and I would join many others in wishing that that does not happen.

Geoffrey Robinson: I entirely agree with my hon. Friend. The one consoling factor is the fact that the shadow Chancellor will not have any prospect of implementing his proposals and causing the ructions that he clearly wants to. When he prays in aid people like Jacques de Larosière and Mr. Fischer, I wonder what supernatural financial wisdom he chooses to invest in them. I would have thought, and I put this to the Minister in his place on the Front Bench, that the House, the country and particularly the City of London should be much more concerned about another French person, namely Michel Barnier-I hope I have pronounced the name correctly and apologise if I have not. He seems to me to be a greater threat to our interests than anything from Jacques de Larosière, who was governor of the rather different French central bank in a rather different set of circumstances and with a different range of responsibilities.
	I propose to look more closely to home and discuss the words of Andrew Large in commenting on the proposals. I do not want to say that he has any particular claim or any unique knowledge to be prayed in aid in any way, but he does speak with a great deal of authority, having been a former deputy governor for financial stability at the Bank of England. He wrote:
	So I am not convinced that to split the FSA and put supervision squarely into the Bank is wise or necessary, or that it would deliver a better result than the improvements under way-
	the improvements in the Bill that we debating now, which have been welcomed throughout the House. He continued:
	Changing architecture involves real risks and the burdens of migrating roles,
	which I could not have put more succinctly myself. In a supplementary but relevant point, he goes on:
	Besides this, the consumer improvements suggested by the Conservatives do not require splitting the FSA in two.
	That was one of the original responses. Here is a clear case for doing more on the consumer front by combining the two agencies that deal with consumer credit. That clear view comes from someone who knows the banking world pretty much inside out and where the precise responsibilities lie. He is saying that the suggestion is unnecessary and not worth the hassle, as it will create uncertainty and divisions, when what we need at the moment are clear responsibilities under-I very much agree with the hon. Member for Twickenham on this-the leadership of the Bank of England. That was very clearly agreed.
	I can well imagine the late Eddie George-some of us risk taking his words in vain today-giving a different impression to different people than he gave to me on the several occasions when the current and previous Chancellors and others were negotiating with him. At the end of that obviously difficult period, I remember him saying that we had come out with a very good role for the Bank of England, with a clear Monetary Policy Committee that was transparent and accountable. He made it plain on each occasion that he still retained the overall responsibility and the lead role for financial stability and for eliminating, in so far as one can, systemic risk.
	That is where we were then and I believe that that is where we still are today. Clearly, we are not going to make any impression on the shadow Chancellor, even in the emollient, consultative frame of mind that he has developed on this matter. As I have said, we have one consolation-the extreme unlikelihood of his having the chance to implement what he is proposing.
	Let me briefly deal with another important matter-the provisions for the class action for consumers. I remember the issue coming up many times with consumers when I was in the Treasury and many times since: it is simply impossible to take legal action as an individual at the moment. With the best will in the world, the financial ombudsman simply cannot cope with the problem. This is a very important new step. No doubt much of the Bill will be further clarified and amended, but I believe that that is one important change to our arrangements and we should not lose sight of it.

Christopher Fraser: Does the hon. Gentleman agree that the Bill does too little too late to deal with the fundamental problems of financial regulation, that it does not deal with his point about consumers, and that it provides inadequate protection for those who have been affected by the financial crisis? Does he agree with that point?

Geoffrey Robinson: I do not, but I will say that the hon. Gentleman has a point, and that it can and, I am sure, will be addressed in Committee. I hope that he will find his just place on the Committee, and that, when he does so, he will ensure that it deals with the matter that he has raised. I can assure him, on the basis of long experience of Public Bill Committees, that such changes can still be introduced at that stage.
	Let me return to the only issue on which I think there is currently any fundamental disagreement in the House. I refer to the idea, apparently endorsed by the right hon. Member for West Dorset (Mr. Letwin), that information flows much more easily within a single organisation than between two organisations. I will merely say that that is wishful thinking. If we followed the logic, we would conclude that the best way of eliminating the inevitable tensions and problems between the Chancellor and the Prime Minister would be to abolish one of the roles and make the Prime Minister First Lord of the Treasury, which, indeed, is his designation. That would- apparently, at least-get rid of all the arguments, but of course it would never work.
	We need those arguments. They tend to become public, and we need them to be available to the public. We certainly need them to be available to those who will make decisions based on the disputes and differences of opinion that are bound to arise. I have no doubt that exactly the same would apply to the relationship between the Governor of the Bank of England and the chairman of the FSA, in whatever guise. The idea that amalgamating them in a single organisation would get rid of those tensions, arguments and discussions is pure wishful thinking. They will still exist, but rather than emerging into the public domain they will be suppressed, and we shall have the worst of all worlds.
	Opposition Members, particularly the shadow Chancellor, should bear in mind the fact that there will be many opportunities for compromise over the exact structure at the end of the day. The Opposition are obsessed with organograms and architecture, as parts of Government often become. Maintaining the FSA intact in terms of its organisation, its authority and its responsibilities would provide them with a simple line-based relationship: a dotted line to the Governor of the Bank of England, and a continuous, heavy black line to the Treasury. That is the sort of relationship that we want. It would emphasise the leadership role of the Governor, and it would avoid what will be a terrible mess when-fortunately in the very distant future, if ever-the Conservative party may have an opportunity to implement its proposals.
	On that cautionary note, let me end by saying that I am grateful to have had the opportunity to speak.

Stephen Hammond: Given your erudition, Mr. Deputy Speaker, you will know that it was Gibbon who said:
	History is little more than the register of the crimes, follies and misfortunes of mankind.
	That really describes what has happened in the financial and economic arena over the last three or four years, and the Bill that we are discussing is about history: the recent history of the financial crisis, and the way in which we, as a country, reacted to it.
	When the global credit markets started to close, initiating the credit crunch that led to a crisis of confidence, it became clear that-in both domestic and international terms-there was no stability in either the regulatory arrangements established by the international community or in those established by the present Prime Minister, then Chancellor of the Exchequer. It can fairly be said that both international and domestic regulatory arrangements failed, but it is clear to us that the greater failure of the domestic arrangements had a greater impact on our economy. There is a huge interrelationship between the financial sector, which has been one of the key drivers of economic growth in our economy, and the financial crisis. We cannot claim that the two are independent of one another.
	The origins of the financial crisis surely lie in the poor understanding of financial risk that was created by financial innovation, and the inability to enable both international and domestic regulation to cope with that innovation and reduce the risks in both institutional and systemic terms. The increase in the financial risk led to greater increases in Government debt, corporate leverage and personal borrowing, which in turn led not only to imbalances in our economic system but to the present crisis in our economy. There is a direct relationship between the crisis in the financial services industry and our economic crisis. We need to understand that the implications of this Bill also involve severe and major implications for our economy.
	In a few weeks' time the Government will present their pre-Budget report, and- as was made clear to all who read the newspapers at the weekend-they are determined to leave voters in no doubt that there will be tough choices for the United Kingdom. Yet again, there is talk but very little action. One of the inescapable conclusions must be that, if our economy is to recover, we shall need a thriving financial sector, and, given the crisis experienced by the financial markets, that will undoubtedly involve some changes in regulation. However, if the Government continue to do what they have always done-for which the Bill provides-they will see the results that they have seen before.
	The questions for the House, and for the Committee, are these: what will the Bill do, is this reform necessary, and is it the right reform? The Government often accuse others of doing nothing while they do a great many things, but in this instance it is a matter of doing the right thing rather than doing just anything. We must ask ourselves whether the new regulatory system proposed by the Bill will be any more efficacious in dealing with a financial crisis-if there is one-than the previous system, or whether it will be less efficacious than the model set out by my hon. Friend the Member for Tatton (Mr. Osborne).
	Members will recall what was said about the tripartite system by the Chairman of the Treasury Committee, the right hon. Member for West Dunbartonshire (John McFall). I saw him this morning, but he is in Europe this evening. He said that it was
	a Rolls Royce when it sits on the shelf, turns into an old banger when it gets on the ground.
	The truth of that has been clearly shown by the operation of the system.
	The Chancellor of the Exchequer and the hon. Member for Coventry, North-West (Mr. Robinson)-whom I am delighted to follow-made much of the architectural changes referred to by my hon. Friend the Member for Tatton. The Chancellor maintained that architectural changes were not particularly important. However, the first four clauses of the Bill are all about architectural change, to almost no effect. I think it somewhat disingenuous, given that those first four clauses seek to establish a council for financial stability, to claim that architectural change is not important.
	The council will replace the existing top-level structure of regulation: the arrangements that embed the joint responsibility for financial stability shared by the FSA, the Treasury and the Bank of England. Those arrangements are governed by the memorandum of understanding referred to by my hon. Friend. The system is very complex. When challenged by the financial crisis, we can only reach the same conclusion as the Treasury Committee, which stated:
	We cannot accept... that the Tripartite System operated 'well'.
	The Government's reaction to their failed tripartite system is to set up the Council for Financial Stability. That is an architectural change. However, the council will have the same three components and participants as its predecessor. It is difficult to see, at first analysis, how or why the new council will operate any differently. If we do exactly the same as we have always done, we see the same result. Is this just a rebranding exercise? According to the Treasury website, the detailed terms of reference are currently only available in draft. It is pretty difficult for us to be any clearer about exactly what changes will accrue.

John Pugh: I am a little unclear about what the hon. Gentleman is saying. He seems to be saying two completely different things. He seems to be saying that this is an architectural change of which he disapproves, but he also seems to be agreeing with the hon. Member for Tatton (Mr. Osborne) that it is a purely cosmetic change. It cannot be both, can it?

Stephen Hammond: Well, it is an architectural change, and the Chancellor tried to convince us that it was not particularly important, but- [Interruption.] If the hon. Gentleman listens to my speech, he will discover that I am arguing that it is a purely cosmetic architectural change, because the participants are the same, as is the predecessor organisation. Indeed, because none of the terms of reference has yet been set out, it is difficult to see whether any real change will result.

Christopher Fraser: I think my hon. Friend will agree that the more fundamental point is that the lack of co-ordination among the tripartite authorities contributed to the severity of the financial crisis, and nothing in the Bill addresses that.

Stephen Hammond: I entirely agree.
	When the Chancellor talked about the CFS, he argued that the arrangements will increase both transparency and accountability, but any analysis of the Government's proposals reveals that potential to be fairly limited. It is not entirely clear how much transparency will be established by the Bill. Whereas under the tripartite system no minutes were published and there was no report to Parliament, the CFS will publish minutes but with a caveat that a significant proportion will not be suitable for publication. There may or may not be good arguments for not publishing the entire minutes of CFS discussions, but the Government cannot start claiming greater transparency on the one hand, and then take it away with the other. That is, at best, a significant failure.
	The Bill establishes the council and gives to one of its participants a huge extension of powers. Given that it has been accepted that the tripartite system failed, why should one of the parties to that failure be given even more significant powers, especially when the Government argued that its existing powers were satisfactory? Can the Government reassure us that this new council is likely to be any more successful in ensuring prudential supervision and stability of the monetary system? Given the limited information the Government have currently laid out, it is difficult for any analysis to be able to conclude that. On that basis, my hon. Friend the Member for Tatton is right to ask the Government to explain why they have not considered abolishing the system and restoring the Bank of England's responsibility for maintaining financial stability.

Andrew Smith: Instead of focusing on substance, the hon. Gentleman seems to be obsessed with architecture. Does he support the idea of giving the Financial Services Authority an enhanced power to intervene when contracts and incentives encourage irresponsible and destabilising behaviour? Is that not the sort of regulation we need to avoid a repetition of the recent crisis?

Stephen Hammond: I shall come on to a couple of items of substance in relation to clauses 12 and 13 that will address that very point, but Ministers cannot talk about architecture and certain things not happening given the contents of the first four clauses. They need to be clear about the following point. Given that the new CFS is to be established, are the extra powers to be given to the FSA either needed or likely to make the FSA more effective? It is not at all clear that they will make it so.
	Clause 12 on recovery and resolution plans-also known as living wills-is broadly welcomed. The Banking Act 2009 sets out the special resolution regime that allows failing banks to be transferred either to a private sector purchaser, temporary public ownership or a bridge bank. The stressful situation addressed in the Bill is less dramatic than the criteria set out in the 2009 Act. However, there is no concise or lucid definition of that stressful situation, and that needs to be provided. The explanatory notes set out-helpfully or not-the recovery plan as one
	which aims to reduce the likelihood of failure.
	What exactly needs to be specified in that recovery plan? What exactly must an authorised person do? Proposed new subsection 139B of the Financial Services and Markets Act 2000 lists a lot of intentions, but very little specifics. That lack of detail is likely to undermine the good intentions behind the resolution plans.
	There is provision for both the Treasury and the Bank of England to notify the FSA if they wish to indicate that a plan is unsatisfactory and recommend action, yet the FSA does not have to undertake that action. I raised that point earlier in an intervention on the Chancellor, and I acknowledge his point to me, which was, We're the Treasury so we're all-encompassing and all-powerful, and as we're standing behind this, the FSA will have to take account of it. If that is the Chancellor's intention, however, why does the Bill not state that? The fact that it does not and that the FSA can ignore the warnings about inadequate regimes reveals an inherent contradiction in the Bill.
	Clause 12 gives rise to two further questions. How easy will it be for complex financial organisations to comply with resolution plans? The FSA has already said it expects there to be some clashes and that it would simplify structures when a living will appears to be unworkable. I hope that the Minister will be able to reassure us in his winding-up speech on the definition of unworkable in this context, and about exactly what powers the FSA will have-and will need to have-to implement the resolution plans. I am sure the Minister is aware that the group finance director of Barclays has already indicated that it has a very complex structure of international subsidiaries and branches. In practice, how will the FSA simplify that organisation to make a resolution plan work? I am sure the Minister has the answer to that.
	The Minister also knows that the G20 believes that there is a consensus emerging on the benefit of resolution plans. I do not think there is any dispute that they are a good idea, and the likelihood is that we will see some co-ordinated international actions on such plans in the very near future. Therefore, in what ways do the Government intend to take notice of that co-ordinated action proposed by the G20? Do they intend to leave this clause in place? Do they intend to say that it will become a sunset clause, so that anything proposed from the G20 can change it, or do they intend to ignore whatever the G20 might try to set out in the framework?
	Clause 13 deals with short selling. As I am one of the Members who in a previous life worked in the financial markets, it is probably right that I resist the temptation to talk about any of the clauses on remuneration. There is an entirely erroneous myth that short selling is relatively new to financial markets, but prior to the change in the method of paying for bargains in the 1990s, the market had many operators who were known as account traders. These were exactly the same people as those who short sell nowadays; they bought stock they did not have the funds to pay for, and they sold stock they did not own. The 1990s marked the onset of hedge funds and the ability to short, the use of derivatives, contracts for difference and so forth, and therefore short selling has become more widespread. However, do the Government accept the point of the Liberal spokesman, the hon. Member for Twickenham (Dr. Cable), which goes to the essence of this? It is that the FSA already has powers to introduce emergency restrictions to prevent the creation, or increase of, net short positions. It also has powers to demand the daily disclosure of net short positions. Those powers were granted under section 118 of the Financial Services and Markets Act 2000. Therefore, this Bill is doing two things. It is extending the sunset clause on the powers to act on market abuse, but the power to act on short selling could be separated from the power to act on general market abuse. The Chancellor had some words to say on the Bill and the powers granted to the FSA on short selling. However, he will know that the British Bankers Association has said:
	The placement of generalised rules on short selling into MAR-
	market abuse rules-
	wrongly associates all forms of short selling with abuse.
	I am certainly not the only person who has interpreted these provisions as placing, despite the separation, the short selling rules in the general market abuse rules.
	There may or may not be a case for tighter regulation, but has not the FSA already got these powers? What extra powers are needed? Do the Government accept that short selling is not intrinsically a market abuse? Short selling enables financial firms to offer hedging and market-making facilities-indeed, it allows essential market liquidity. Making liquidity in both the London markets and the international markets means that markets function. We have seen that when markets seize up that has direct economic repercussions. Do the Government accept that short selling is a tool that is not intrinsically wrong or an abuse, but just a financial tool? What is wrong or abusive is how it is used in some circumstances.
	Is what the Government are doing in this Bill merely an admission that the FSA has failed to use its existing powers? A lot of market participants take that view of the Bill and think that there is no need for a general extension of those powers. The FSA's statement of September 2008 was extensive and inclusive, and the necessary powers appear to be in place. The Minister must be clear tonight as to why these proposed powers are necessary. I am grateful to have had the opportunity to make a few brief remarks. Unlike the hon. Member for Coventry, North-West, I am grateful that I will not be on the Committee, but it will explore a number of these issues.

Mark Todd: I do not know whether I shall be serving on the Committee for which some people are volunteering and on which others will be extremely disappointed not to be serving. It will consider a portmanteau Bill covering a wide range of issues relating to financial services. Thus, the hon. Member for Twickenham (Dr. Cable) reasonably said, Well if it is such a bag, let's see what other elements might be stuffed into it. The Committee will almost certainly have before it a number of amendments suggesting the inclusion of a variety of measures, particularly on consumer protection, that might be useful.
	May I run through some of the issues in which I have been particularly interested, the first of which relates to the Council for Financial Stability? I serve on the Treasury Committee and I subscribe to the opinions that it expressed: that this would appear to be a rebranding exercise, unless far greater detail is given about how this body will function. The Bill is silent on that-we will doubtless hear more in Committee. Those who miss that experience will miss out on the detailed exposition that might be given.
	One of the difficulties that we face is that at the start of this crisis no institution explicitly had responsibility for financial stability, but now everyone has. The Financial Services Authority has been given it-or it will be given responsibility, should this Bill pass into law-and the Banking Act 2009 gave it to the Bank of England. I am not sure that that makes us feel much safer, partly because when everyone shares a responsibility, it is not entirely clear who is genuinely answerable for decision making-I shall discuss that later.
	Secondly, I am not sure that we are very clear on what financial stability actually means. We know when it is absent-that is easy to work out; we have been through a period of obvious financial instability-but it is not entirely clear how we define financial stability and how we learn, institutionally, of the threats that there might be to it, which will not be identical to the ones through which we have been recently.
	In any institutional framework-be it this tripartite system or the system that the hon. Member for Tatton (Mr. Osborne) proposed-the things that most concern me are how exactly it will work, and how information flows and how the allocation of the tools and responsibilities for dealing with crises are addressed. This is one of the areas where the Governor of the Bank of England has been perfectly fairly pressing the political class in this country to define its positions more clearly. If we are to allocate responsibilities for financial stability, the crucial element is to work out who does the various tasks. We are still searching for firm answers on that.
	One of the issues that concerns me most is information flow. If the FSA retains, as I believe it should, the regulatory responsibility for financial institutions in this country, the information gathered will be a crucial part of the Bank of England's carrying out of its financial stability responsibilities. I am not entirely clear that that information flow works correctly now; it is not built into law in the 2009 Act. I, like those who sat through that Committee stage, remember some discussion about whether it might be included in the legislative obligations attached to the FSA and passed through to the Bank of England.
	My second area of concern relates to who exactly makes the decisions. There are trigger points during a crisis at which it is clear that one person provides information and another says, This is what we are going to do. I am always uncomfortable about such a process. We still have some refinements to make on this.
	The hon. Member for Tatton has departed to the event that will keep him away from the wind-ups, so I shall have to address the hon. Member for Fareham (Mr. Hoban) in the hope that he may pass this point on. The hon. Member for Tatton gave an exposition of the support that he appears to be getting, but some of that comes from those who, as I have said, are naturally looking to their own futures and wish to make positive remarks to what they see as a possible Government in waiting. If I were in such a role, I would not want to be dismissive or rude about proposals put to me by an Opposition who appear to be leading in the opinion polls. We have to understand human nature.

Christopher Fraser: I am listening carefully to the hon. Gentleman, but does he acknowledge that the lack of co-ordination among the tripartite authorities, as has been described, has contributed to the severity of the financial crisis we are going through?

Mark Todd: I do not think that that has contributed to the severity of the crisis; I think it did contribute to the slightly muddled handling of the crisis at its very beginning. The report that the Treasury Committee prepared on the initial stages of the banking crisis usefully highlighted some of the difficulties of communication both between the tripartite authorities and, perhaps equally importantly, outwards to the rest of us, as they acted. I do not think that there was a proper process of public exposition of what was going on to critical market makers and to the general public.

Christopher Fraser: Therefore, if we do not tackle the structural problems with regulatory reform, there will be more ambiguity about where responsibility lies. Does the hon. Gentleman agree with that?

Mark Todd: On that, I would side with the hon. Member for Twickenham by saying that structures do not necessarily clarify responsibility or improve communication.
	I am leaving this House at the next election, so I do not mind saying one or two things that I might not have said on another occasion. I went through the painful process of observing health service reform, as I suspect that we all did-certainly those of us who have been here since 1997-and the obsession with structural reform in the health service is an exact example of the atrophy that can be produced if that obsession is followed through. We end up freezing people's actions for a period; they worry about their careers and try to work out where they will be doing their jobs and how they will carry out their responsibilities instead of doing the things that we genuinely want them to do. The Government have not been guiltless of an obsession with structures. I advise the Opposition, should they have the opportunity to implement their plans, not to follow those obsessions.
	Let me turn to other positive elements of the Bill. I will be very surprised if anyone pops up in this debate and says that living wills are an unwelcome proposal. There is an issue with quite how they will be implemented, but I would probably argue with the hon. Member for Tatton, were he here, and say that part of the exercise is to tighten corporate rigour over the understanding of the structures and risks. One of the difficulties that we have seen is the extraordinary engineering that sometimes goes into corporate structures in the financial sector, which is perhaps lost on some of the board, too. An attempt to force companies into at least applying rigorously an understanding of how their organisations fit together and therefore how they might be deconstructed at some stage in the future, should it come to that, is a helpful process that they should have to go through. Yes, it is tiresome and possibly bureaucratic, but it will possibly also expose areas of uselessness and pure engineering in an activity rather than areas of functional need. It is certainly useful for the regulator to understand that process, too.
	That is only one element of addressing the issue of whether such institutions are too big to fail. I, too, take the view that capital and liquidity obligations are almost certainly the key element of dealing with the too big to fail argument. However, I do not rule out the approach that the Governor of the Bank of England has, I think espoused-if we do not force the break-up of these institutions, we should at least structure them in such a way that taxpayer risk is more confined. If one chooses a corporate model that includes a retail bank and an investment bank structure, we should at least have some means of limiting the taxpayer liability to the service element of the banking institution that we are supporting. Such a provision is worth considering and is not developed within the Bill.
	When it comes to improving corporate governance, although it is certainly true that there has been regulatory failure-those who do not think that should look at the internal audit report that the FSA produced after Northern Rock-there has clearly been behavioural failure too, which is not the responsibility of regulators but is possibly to do with the nudges, to use the fashionable term, that we try to apply to prompt appropriate action among those who are carrying out functions in our society. I assume that the new powers on financial reporting, which I believe that the Treasury will be taking, will address the Walker recommendations on risk committees, giving them a separate reporting stream in corporate governance. Perhaps we will hear more about that in Committee.
	Although the regulation of remuneration, which many have commented on already, is certainly popular, it has a rather muddled parentage. In considering this Bill, we should be concerned about whether high bonuses or pay should be subject to regulation only if they increase the risk of the institutions. That is how they should be considered; it is not for this House to consider in this Bill whether it is equitable to pay people staggering amounts for carrying out their tasks. There is a question about whether society should permit that and whether people should be taxed more, but that is a separate issue that the House should certainly consider but in a different context.
	Our decision making on that should be informed, but not wholly governed, by competitive pressures. We are too easily persuaded by financial institutions saying, If we do this, all these people will wander off and go to the United States, Switzerland or wherever else they think it might be advantageous to go- [ Interruption. ] I am not saying that we should ignore it. We should be informed by it, but not necessarily governed by it. One point that we should be governed by, which is important and that again came up in the discussions on the Banking Bill, is the fact that we should not threaten the contractual nexus between an employer and an employee.
	One element of this Bill, cited by the hon. Member for Tatton, touches on what the Government might intend if they outlawed certain pay and remuneration practices. Although I would not subscribe to the view that our problems have stemmed wholly from a failure of regulation, there are ways in which we can encourage rational and prudent behaviours and discourage the opposite. These include addressing remuneration models and strengthening risk governance and reporting. They should also cover strengthening the capability of non-executives and the robustness of the relationship between shareholders and the board.
	One of the saddest elements of listening to the evidence given in the Treasury Committee has been listening to banks talking about their interaction with shareholders. Perhaps the most telling remarks were those made by representatives of HSBC, who related how they were strongly criticised by shareholder representatives for their conservative models of banking. Shareholders also totally ignored some of the evidence that lay before them of extraordinary risk: the ABN AMRO acquisition was endorsed by RBS's shareholders. It is worth thinking carefully about how shareholders can be better empowered and informed in making critical decisions about their interest in companies.
	Let me turn to clause 6, which has not yet received any attention and which covers the education role of the FSA, establishing a new consumer finance education body. I strongly welcome the operational separation of the FSA from the education function and the broadening of the governance of that critical activity, which I take to be the implication of setting up the board. Presumably, the body will absorb all the FSA's function in consumer education, including the work carried out by PFEG-the Personal Finance Education Group-in schools. It is worth commenting on the FSA's view of how it carries out those functions now.
	In an exchange between Lord Turner and me in the Treasury Committee last week, I pointed out that the FSA had certainly caught targetitis. A huge screed of targets have been set for achievement in financial education, but if one glances through them to try to make sense of their qualitative elements-in other words: what difference are we making by doing what we are doing?-the report is almost entirely silent.

John Pugh: The hon. Gentleman may have noticed that the Chancellor of the Exchequer referred to the fact that such schemes were being trialled in the north-west. It would be interesting if he could tell us exactly what the quantifiable results of the trials were.

Mark Todd: The hon. Gentleman raises an interesting point, on which I cannot enlighten him. I can say that if one glances through appendix 7 of the FSA's annual report, one finds an example of the way it reports targets. It was set a target of reaching 516,000 children in England with a learning money matters project and reported that it had exceeded the target by reaching 742,500 children. As far as I can tell, that figure seems to be the number of schools to which the FSA sent material multiplied by the number of pupils who were presumably in those schools, so one wonders whether the word reach is appropriately applied to such a limited and-from what I know about the distribution of the packs-doubtful link to a school institution. There is a lot more. I picked only the first two targets.
	A lot of money is being spent on that objective and more is to come, so clear quality indicators are required, showing what difference has actually been made by providing those services. No one doubts that providing financial education for children and for consumers at large is very important, but what I have seen is of relatively limited quality. Quite often it is fancy stuff; as an MP, I should be proud to give it to constituents, but I wonder whether they would actually use it. I have repeatedly raised concerns about the issue, but have not been satisfied, so if the measure improves the governance of the programme, I shall be delighted.
	Finally, I welcome the measures on facilitating collective proceedings by consumers. It is an important step. I note the concern of the banking industry and its opposition to the proposal, but I merely note it-they would say that, wouldn't they? We should obviously listen carefully to detailed representations, but we should press ahead on the principle. We are dealing with complex products and services, and without the aid of a representative body the ordinary consumer at large is often ill-placed to pursue a complaint against a financial institution. Giving consumer groups a clear role would leave it far less to chance that well-informed and resourceful consumers will sometimes win through in the end. I represent someone who has been fighting their way through energy issues-an almost equally complex area-and it is a delight to deal with someone who is really getting to grips with the detail. However, the experience has left me feeling that vast numbers of people do not have the time, expertise or will to go through such a process. That definitely applies to the financial market, so if collective action is to be the first step, I welcome it.
	There is a lot to welcome in the Bill and I very much hope that we will be able to pass it before Parliament is dissolved.

John Howell: I want to return to the subject of architecture. I looked in some detail at the  Official Report of the Queen's Speech debate on the economy in the other place, and particularly at the remarks of Lord Myners. It was difficult to see where he was departing from the view that the financial architecture was important; indeed at one stage, with consummate cheek, he accused the Conservatives of not being good at seeing the big picture of financial architecture and economic challenge, so I wondered whether the Chancellor's comments earlier, when he tried to downgrade the importance of the architecture, expose something of a rift between him and the City Minister.
	There is no better example of the Government's failure to see the big picture and the need to change the financial architecture than the Bill. It is a superb example of how the Government have failed to see that the crisis has made the need for a big picture change more necessary than ever. They fail to realise that it is no longer the case that just a bit of restoration to a slightly damaged canvas is required-changing the artistic imagery slightly. Instead, we need a new canvas. Instead, what we get in the Bill is detailed draftsmanship and micro-management to hide the fact that the proposals introduce little substantive change to the overall regulatory architecture of the financial sector. That is largely concealed behind quite profound changes in consumer protection and consumer action, with many of which I, like the hon. Member for South Derbyshire (Mr. Todd), agree.
	In summing up in the Queen's Speech debate in the House of Lords, Lord Myners said that the Bill would ensure that the financial system was
	rebuilt on a stronger...footing,-[ Official Report, House of Lords, 25 November 2009; Vol. 715, c. 464.],
	continuing the image of architecture that has pervaded the debate. That may be his aim, but it is difficult to see how this Bill rebuilds anything. He has presumably forgotten that architecture is relevant only if the building has strong foundations, and that merely slapping on a coat of paint and papering over the cracks does nothing.

Christopher Fraser: Does my hon. Friend agree that the way in which the Bill is structured leads to more ambiguity about where responsibility lies, and does not tackle the fundamental problems?

John Howell: I do indeed agree, and I thank my hon. Friend for his intervention. I will say something about that in a few moments.
	The Bill does nothing fundamental about those issues, as is demonstrated by the fact that it has at its heart the preservation of the tripartite system, albeit that that system will be enhanced by more regulation. I was interested in the comment by the hon. Member for Coventry, North-West (Mr. Robinson), who is no longer in his seat, that there is risk in changing the financial architecture. I agree; indeed, there was a risk in changing the architecture to the tripartite system in the first place, and the results are now coming home to roost. The question is not whether there is risk involved, but how that risk is managed. That goes to the point that my hon. Friend the Member for Tatton (Mr. Osborne) made about how the new structure would look under a Conservative Administration.
	As so often with this Government, there are only two tools in the toolbox. The first is the target culture, which is seen here in the role of the FSA, and is pursued elsewhere through the declaratory legislation of the Child Poverty Bill and the fiscal responsibility Bill, which will encourage special interest groups to drag the Government through the courts when targets are not met, until economic policy decisions will inevitably be taken by judges rather than Parliament.
	The second tool in the box is regulation, of which the Bill before us promises much. As with so many other Bills that rely on regulation, however, we debate it in a vacuum and we do not get to see the regulations into which the substance of the Bill has been hived off-sometimes not even in Committee. I therefore ask the Government to outline the timetable for producing the draft regulations associated with the Bill-particularly those on collective proceedings-and to ensure that they will be available to the Public Bill Committee, because I am volunteering to serve on it, given the fundamental nature of the Bill.
	There is every indication that the Bill has been rushed through without as much thought as it deserved, notwithstanding the recent White Paper. Although there was consultation on the White Paper, I am struck by the number of organisations that have complained at the lack of consultation on the detailed proposals in the Bill. Clifford Chance makes that clear in an article in  Lexology on 24 November, in which he says:
	There was relatively little consultation on the proposals...and there was a limited opportunity for interested parties to debate them.
	Maggie Craig of the Association of British Insurers is quoted in an ABI press release as saying that she is
	alarmed this is being rushed through without proper consultation with industry. This is too important not to get right.
	The lack of consultation is implicit in the comments from PricewaterhouseCoopers partner Jon Terry about the unintended consequences of the clauses about the power of the FSA for contracts, and about the distraction that those could cause when it comes to ensuring that risk is properly taken into account.
	As other hon. Members have asked, why do we need a law to bring the Chancellor, the Governor of the Bank of England and the head of the FSA together, when there is a mechanism for doing that already? The answer was provided by a nameless Treasury spokesperson who was quoted in the FT Adviser website article. We now find out why the Bill is required. He is quoted as saying:
	We will be replacing the existing structure of the Tripartite arrangement where we meet strictly on an ad hoc basis and never publish any minutes of our meetings and never reporting to Parliament. Now they will be formalised and just like the Monetary Policy Committee they will have formal minutes.
	Well, there we have it-the real purpose of the Bill and its real impact. The Bill is required because the Chancellor, the Governor of the Bank of England and the head of the FSA cannot keep minutes. The real title of the Bill should be A Bill to make provision amending the Financial Services and Markets Act 2000 and for the installation of good practice in minute keeping by the principals in the tripartite system.
	I am sure that we will all now feel much safer because of that-but things get worse. The Government's response to the House of Lords Economic Affairs Committee recommendation on the new tripartite system is that the new council will replace the existing memorandum of understanding. It clearly has no real Executive functions. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said earlier, this is nothing more than a rebranding. It fails to address the serious concerns raised by many people, such as Professor Wood of the Cass business school, that
	the tripartite structure is fundamentally defective.
	He continued:
	Everyone made mistakes...but it is quite clear that the actual structure of the regulatory system was not satisfactory before the crisis.
	So I am left with four questions for Minister to answer on that part of the Bill. First, does he not accept that there was at best a lack of co-ordination between tripartite members, and does he really believe that the Bill will fix the problem? When meetings are so formal and the structure so inflexible, how will the system operate in a crisis? Any company that faces a new structure will at least have done some comprehensive modelling of what the new structure would be like, and those who take a proper risk approach will have done some modelling of how it would work in a crisis. Surely we should expect the same diligence to be undertaken by the Government in relation to what they propose in the Bill.
	Secondly, does the Minister accept that the Bill will introduce more ambiguity about where institutional responsibility lies? My hon. Friend the Member for South-West Norfolk (Christopher Fraser) asked that question in his intervention. Thirdly, does the Minister accept the advice from the House of Lords Economics Affairs Committee that
	for crisis management to be effective, it needs to be clear who is in charge,
	and also accept that the Bill does not answer that question? If he is unwilling to listen to advice from the Opposition, is he willing to take on board the comments of the CBI, CMS Cameron McKenna and the Association of British Insurers about the remaining confusion of responsibilities that the Bill will create?
	The CBI says:
	A disadvantage of giving the FSA an explicit objective for financial stability is that this would perpetuate some of the ambiguities regarding institutional responsibilities that were apparent in the build-up to the financial crisis.
	Cameron McKenna says that this
	is old wine in a new skin-merely another way of expressing the existing Tripartite authority which has not delivered the stability that is needed.
	ABI says:
	We are concerned that the proposal to give the FSA a financial stability objective will exacerbate the confusion of responsibility between the Bank and the FSA.
	Finally, does the Minister accept that the new role for the FSA that the Bill proposes is a rebranding exercise, without any meaning without more fundamental change? How else are we to interpret the Government's response to the House of Lords Economic Affairs Committee recommendation at paragraph 115, about the need for executive responsibility? How else are we to interpret the Government's response that the Council for Financial Stability will work essentially by reviewing publications about the problems that are happening? It does not sound as if a dynamic institution is being suggested. This is the time to give power for macro and micro-regulation and responsibility for financial stability to the Bank of England, so that we know that somebody competent is in charge.
	There are two other areas on which I would be grateful for the Minister's comments in his winding-up speech. It is clear that the need to ramp up consumer protection issues so much in the Bill is an indication of a failure to take consumer protection into account in the tripartite arrangements that were put in place by the Prime Minister. I welcome a focus on the need for consumer education. There are 9 million people in the UK in serious personal debt, and British consumers are twice as indebted as people in the rest of Europe. There is very little financial education around-so little that a MORI poll from 2004 showed that only 30 per cent. of people could work out a simple interest rate calculation.
	It is not only people on the lowest incomes who are likely to enter into serious personal debt. High debt can push people on higher incomes into poverty, too. We know that there is a circular link between personal indebtedness and social problems, and that debt is a cause of social problems. Recently, the Save the Children campaign calculated that the present recession has caused 5.2 million households to be classed as sub-prime, and 25,000 consumer credit applications are turned down every day.
	It surely defies credibility that financial education should come from the FSA, given its record in the present crisis. I tend to agree with the British Bankers Association that this should be dealt with elsewhere and should be more fundamental. That is why our proposals for a strong new consumer protection agency are so important, setting it out as a champion for consumers.
	I remain concerned about the practical implications of the use of the courts proposed in the class action proposals. Given that the courts are likely to be snarled up by judicial reviews of Government economic policy, one wonders whether there will be any room for consumer cases to be heard at all. But this is a serious issue and many commentators have commented on the fact that the proposals will create a US-style litigation culture. It would therefore be good to hear from the Minister what work has been done to show that that culture in the US has benefited customers, and what lessons have been learned by the Government in framing the Bill and the regulations that will come with it.
	This is an area that would have benefited from wider consultation, to ensure balance if nothing else. I would like to hear more about how the Government see the balance which will be required between the responsibilities and the rights of consumers.
	I want to ask some questions of the Government about how the Bill will relate to emerging regulations from the EU and the direction of travel in relation to the G20. I listened with great care to what the Chancellor said at the beginning of the debate about the red lines and the connection with regulation. I am not yet convinced that any of us understands precisely how those red lines will work, or how the Government's stance in the Bill will be taken forward.
	I have two issues in mind. As the Minister knows, the Commission issued a Green Paper on collective redress, setting out a number of options for settling large-scale consumer complaints. That was followed by a period of consultation earlier in the year, which produced conflicting results not only on whether collective redress was desirable, but on how it should be implemented. I understand that some leading European lawyers have questioned whether, under EU law, there is a clear legal basis for consumer collective redress. I am therefore keen to know to what extent the Government have taken into account the Green Paper and the underlying consultation, and whether their proposals conflict with European law.
	In September the European Commission adopted proposals aimed at addressing regulatory weakness at micro and macro-prudential level through the creation of a European system of financial supervisors and a European systemic risk board. The Chancellor covered some of that, but I would still be grateful if the Minister who is to wind up could say what the relationship will be between what the Bill proposes and what the Commission proposes.
	Looking more widely at the implications in terms of the G20, concerns have been expressed that the speed with which the Government are acting in the Bill, in advance of similar proposals from other countries, is a distinct competitive disadvantage. That has been expressed mostly in terms of the power to control remuneration contracts, but also in terms of creating living wills. The CBI has pointed out the need for the consistent action that other countries are taking if we are to avoid damaging the UK's competitiveness, and PricewaterhouseCoopers has commented on how the provision as drafted may catch others whom it was not originally intended to cover. Indeed, Lord Myners dismissed that with a rather populist phrase about curbing reckless greed, but I hope that the Minister will treat the subject more seriously and tell us how the proposals go further than merely treating the symptoms of the disease, and get to the heart of the cure, which would involve a complex culture change in the appreciation of risk-a much broader and more complex subject.
	The noble Lord dismissed concerns that the UK's unilateral action would be contrary to competitiveness, stating that it was
	setting the trend and direction of global thinking,
	so will the Minister tell us the likely time lag between our leadership of global thinking and others catching up and putting the same proposals into operation?
	All that is important because of clause 8, which imposes a duty
	to promote international...regulation and supervision.
	It also includes a duty in terms of
	the desirability of maintaining the competitive position of the United Kingdom in respect of financial services and markets.
	The Library research paper on the Bill points out very effectively that the FSA is already involved in the promotion of international regulation and supervision. The paper notes that
	around 70 per cent. of the FSA's policymaking effort is driven by European initiatives, including the Financial Services Action Plan.
	It also discusses the way in which the FSA already participates in other international forums, including
	the Basel Committee, the International Organisation of Securities Commissions, and the International Association of Insurance Supervisors.
	After reading clause 8, and after listening to what the Chancellor said about the relationship between the UK and the world in his opening speech, I am left with an overriding question about what, additionally, the Bill delivers and what scope and tactics-strategy might be too big a word for it-the Government have in place to deal with international regulation and supervision as part of their overall approach to the supervision and regulation of the financial services industry in this country.

Derek Twigg: I welcome the Bill, which will give consumers more protection, an issue that I shall dwell on in my speech. The legislation will also empower the FSA and the Government to introduce tougher regulation of banks and their risky practices; better protect the taxpayer; importantly, restore consumers' confidence in financial services by providing people with greater protection and education; and, very importantly, provide powerful and easier routes to redress when consumers have suffered widespread detriment.
	Although we might be discussing how we will create better regulations to give the consumer more protection, we should not forget the impact of the banking and financial crisis on constituencies such as mine and the human cost, which is so often lost when we get to the detail of such Bills. Over the past year or two, unemployment has increased more rapidly in Halton than anywhere else in the north-west bar Knowsley. Recently, the unemployment rate has slowed, but it continues to affect many families and individuals in my constituency and elsewhere. People have found themselves unemployed for the first time. Indeed, one constituent told me that, until recently, he had not been unemployed in 38 years.
	Many more people have fallen into debt, something that we are discussing as part of the Bill, and many have had their houses repossessed. We should not forget the impact on businesses, particularly small businesses. All that, of course, was caused by the incompetence and greed of bankers and financial institutions.
	On executive remuneration, my constituents have raised with me the issue of greedy bankers and bank bonuses. Of course, I am not talking about the ordinary bank workers in the offices of local branches but those who take the decisions and make the big salaries. It is hard to ignore the link between the risky activities of companies at a corporate level and an incentive structure that rewards such risk-taking at an individual level. Knowing what we know now, it seems remarkable that the financial institutions and those who had responsibility for managing them did not recognise and understand the risks they were taking on and were unable to prevent the consequences or to put in place plans to deal with them.
	I am pleased that the Bill gives the FSA new powers on bankers' pay. Importantly, it also gives the FSA the power to rule that employment contracts not compliant with the code are void and unenforceable, and to make provision for the recovery of any payment made under a void provision. There must be more transparency on the disclosure of remuneration and pay bands. Irresponsible behaviour has to be changed. I welcome the increased supervisory and information-gathering powers and punitive measures.
	The provisions on the disgraceful practice of sending out unsolicited credit card cheques to consumers are particularly welcome. There is no doubt that that can encourage people to take on more debt when many are already in financial crisis, and I am pleased that the Government will legislate to ban that practice. We have seen the usual bad practices with small-print conditions-for example, the interest rate applying to payments is not clearly stated in all cases, and it is sometimes not indicated that using credit card cheques to make payments means that cardholders do not have any redress against the credit card company. I welcome the intention to make it an offence for a credit card issuer to send credit cheques to a customer other than in response to a request from that customer.
	Excessive bank charges have been the subject of ongoing discussion, particularly with the recent court ruling. That problem has to be dealt with, and I would prefer the Government to take more regulatory powers in order to do so. We should take action on unsolicited credit card limit increases that just appear through the letterbox. The practice of changing the interest on monthly credit card payments will particularly affect young people and get lots of them into debt.
	I very much welcome the proposed establishment of the consumer financial education body and the provision of guidance on money. Several hon. Members have mentioned the importance of education on consumer credit and financial management. Consumer education and awareness is a key part of the Bill. Citizens Advice welcomes the establishment of the consumer financial education body, saying that it is a step change that will benefit consumers enormously. The work of citizens advice bureaux in delivering financial education has demonstrated the appetite and need for such training and the quantifiable improvement that it makes to people's confidence in dealing with their financial affairs. For example, according to Citizens Advice, 38 per cent. of clients who took part in the Save Xmas financial education sessions funded by the Office of Fair Trading said that they had since made changes to how they save.
	From October 2008 to September 2009, citizens advice bureaux dealt with more than 2 million debt problems-an increase of 21 per cent. on the same period in 2007-08. I pay tribute to citizens advice bureaux, particularly the branch in my constituency, which does an excellent job, and with which I work very closely, in helping people in severe debt or other financial difficulties, which have been exacerbated by the economic downturn. I particularly commend its volunteer programme. I am pleased that the impact of debt on health is being further highlighted. That is why the primary care trust in Halton has been funding debt advice in addition to the money that the Government are putting in.
	A few months ago, I met representatives from the Resolution Foundation, whose aim is to improve the well-being of low earners by delivering change for that income group, who are currently disadvantaged. The foundation identified that low earners fall into an advice gap whereby commercial advisers focus their attention on the better-off, and the third sector and the Government focus on the most vulnerable. Its research found that a low earner in receipt of money guidance could be £60,000 better off by the age of 60 by making sound financial decisions throughout their life.
	A poll conducted by the foundation in March 2009 found that nearly 3 million low earners worry all the time about their personal finances-double the number in a similar survey in 2007. The CFEB will increase the profile of money advice, the wider financial capability agenda and general financial education that so many people badly want to see. It will also be able to raise funding from a variety of streams, with no extra administrative burden on financial services.
	Short selling has been mentioned. It has been an area of great concern at the outset of the crisis and since, and there is some discussion about how it should be regulated. I think it right that the FSA should have a power to place a restriction on short selling and require its disclosure. An independent power dealing with market abuse is very important, but I would like Ministers to provide further clarification, because points have been made about how such a power will be incorporated in the Bill and actually improve the situation. I continue to have serious concerns about short selling. I understand the benefits that it can bring, but we have seen far too much of the disadvantages of that practice, and I would like some more information on it.
	Increased supervisory powers, information gathering and punishment are key measures that I support, but I also welcome measures to enable consumers to obtain redress and compensation more easily in cases of widespread consumer detriment.
	I want also briefly to mention banks and bank lending. I know that there is a view that some banks have improved, but I still get constituents and businesses coming to me to complain bitterly about the banking system and how it does not help small businesses, particularly regarding lending. I am not suggesting that we have to put such regulations in this Bill, but we should consider the issue.
	I welcome the Bill's main proposals, but there are certainly other areas, particularly those affecting consumers, that we need to look at. I hope we can discuss them at a later date.

Mark Field: For some centuries past the City of London's greatest attraction has been its international reputation as a bastion of commercial certainty and reliability. English law is respected across the globe: countless contracts between parties from far away continents are often drawn up under its jurisdiction. In commercial affairs the City of London is rightly seen as a watchword for justice, neutrality and fairness. Too much, I fear, of what is proposed in this Financial Services Bill flies in the face of this fearless and hard-earned reputation. It threatens to do untold damage to the United Kingdom as a commercial and trading centre.
	Even in the face of two world wars, the City of London regarded with the utmost seriousness its international contractual obligations-even to counterparties from those nations with which we were in conflict. We meddle with this proud history at our peril. I am therefore especially alarmed at the plans to give the Financial Services Authority the power, among others, to tear up future contracts that do not comply with its new arbitrary regulations on curbing remuneration and bonuses. The notion that the FSA might in such a way strike out legal contracts will cause grievous harm to the reputation of English law and the national sense of fair play. It also seems likely to fall foul of international-in particular, European Union-obligations on competition policy.
	Moreover, these draconian proposals are probably going to be impossible to implement in full. We will then be in the absolute worst of all worlds: putting on to the statute book legislation that gives a clear signal to international trading partners that Britain is no longer such a free or fair place to do business; but also concocting a set of regulations that are, for practical purposes, impossible to enforce.
	As ever, there seems to be little consideration of the national interest in what the Government propose in this Bill. Instead, we see short-sighted, tactical positioning. At a time when my own party has made it clear that an incoming Conservative Administration would dismantle the Financial Services Authority, the Treasury now seeks to limit our future room for manoeuvre by empowering it even further.
	The Bill also prompts the obvious question that I put to the Chancellor earlier. Given that the threat of closure hangs over the FSA, how on earth will it be able to recruit sufficiently talented new staff to take on its enhanced responsibilities? It is important that the authority and the Treasury properly think through all the practical implications of the Bill. Its unintended consequence will be that institutions are far less likely to wish to do business on these shores, which will be to our collective detriment in the years to come.
	The Prime Minister's recent resurrection of the notion and desirability of a Tobin tax at the recent G20 Finance Ministers meeting is further cause for alarm. Promoted as a way of recouping more quickly the taxpayer cash put into banking bail-outs, which at least superficially seems a desirable enough goal, and of rebalancing the economy and helping the poor, as a surcharge on financial services it would in reality fulfil none of those objectives. Unless it were implemented in precisely the same way globally, it would be impossible to put into effect without disastrous consequences for both London and the UK. The United States has already signalled its clear opposition to such a levy, making it more likely that if it were to be applied on these shores, even in a diluted way, business would flee to countries free of the tax or simply engineer new financial instruments to get around it.

John Pugh: The hon. Gentleman seems to object to the FSA being empowered to do something about future remuneration, bonuses and the like in the banking sector. Presumably his party argues that a future Chancellor of the Exchequer ought to have that power. Is he arguing against that as well?

Mark Field: My objection was to existing contracts being torn up. It was the retrospection that I was objecting to. Ultimately, any regulatory authority should perhaps have quite significant and draconian powers along the lines envisaged elsewhere in the Bill, but my concern is about the longer-term influence of the changes on our stability and competitiveness.
	The same principle applies to many other proposals in the Bill that would penalise the financial services in the UK. Unless it were imposed on a global scale, any initiative designed to curb bonus payments, for example, would simply drive from our shores the brightest and best in this important industry. I do not say that as a threat, because I strongly believe that no Government should be blackmailed by those in any industry into serving its particular interests above all others. However, I cannot help but conclude that in this Bill, the Government are simply grandstanding rather than introducing measures that will really be effective and minimise risk.
	It is easier to focus on a single issue such as bonuses than to examine major failings elsewhere. Failings in risk modelling, credit ratings, macro-economic management and elements of regulatory oversight, as well as a number of other contributory factors, created the conditions in which excessive profits were made. As my hon. Friend the Member for Henley (John Howell) said, huge bonuses were the end product of a dysfunctional financial system, not the underlying cause of them.
	Another suggestion is that far more of any remuneration package should be in long-term incentives rather than cash salary. Superficially that is an attractive proposition, but we should not forget that it had very little effect on the fate of either Lehman Brothers or Bear Stearns, two of the banks that have collapsed most spectacularly over the past two years. Both those organisations were famous for rewarding successful employees with large amounts of stock, which either by law or by internal practice proved unmarketable for a considerable period, yet that had little impact on the ultimate demise of both.
	The City remains concerned that seeking short-term solutions on bonuses to quell public and media demands could bring down on the industry a raft of new regulations designed more to punish that anything else. It should also be remembered that high remuneration, be it in salary or in bonus, is not such an emotive issue outside Europe. We need to recognise that our regulation and tax policies have to take account of those prevailing in other countries that pose a competitive threat.
	Let us not forget the importance of maintaining our focus on the issue that will dictate our economic health for years to come: the colossal sums of taxpayers' money and the immense Government guarantees that continue to underpin the entire financial system. The imperative to start repaying at the earliest opportunity cannot be overstated, yet commercial lending is unlikely to return to anything like normal until the second half of 2011 as toxic assets are gradually removed from banks' balance sheets. I therefore believe that the credit crunch will be with small and medium-sized businesses for some time to come.
	To extend beyond £200 billion of quantitative easing puts our medium-term economic prospects at great risk. When can the Bank of England and the Treasury call time on their short-term fix? Amid the euphoria of a narrative that suggests that recovery is well within sight, I fear that we are a considerable way from being out of the woods. The root causes of the global imbalances brought about by the west's financial calamity were the credit/debt bubble, along with the east's aggressive desire to build market share in global trade. China's policy of suppressing its currency to soak up the west's debt in the bond markets further helped hold down interest rates. Yet the resultant over-investment, excess capacity and vast structural debt in the west remains in place. The underlying causes of the credit crunch have not gone away.
	Notwithstanding the ruinously expensive bail-outs and capital raising, the losses incurred by banks are probably still not even halfway recovered. Indeed, I fear that the Government's insurance of toxic assets has provided a dangerously false dawn. There is no incentive-or currently even a requirement-for banks to crystallise non-performing loans; they could not then ignore the losses on their balance sheet. Lloyds banking group, for example, with a huge property portfolio, courtesy of its ill-starred merger just over a year ago with HBOS, sits on an enormous pile of assets worth a fraction of their book value at their boom-time purchase.
	The collapse in public confidence in financial institutions and their more esoteric products has met with a strong-armed, sometimes opportunistic political response. Put simply, we need to ensure that management in banks can summarise in simple terms the financial products they wish to sell. To that extent, I agree with the hon. Member for Halton (Derek Twigg)-if a derivatives product cannot be explained on two sides of A4, frankly it should not be marketed. Naturally an unworkably complicated regulatory framework risks seriously hitting the future viability and profitability of the entire industry.
	Instead, the well-being of the institutions in the sector-not to mention its customers-depends on the development of a workable regulatory system, based on commercial principles, which will pass muster for decades to come. How else can we persuade those in their 20s to commence a lifetime of prudent saving as a prelude to a financially comfortable retirement? It all comes down to trust. That is an ingredient that no amount of regulation or consumer protection will rapidly restore.
	Alongside the promotion of open competition and an end to the heresy that a bank might be too big or interconnected to fail, the best a Government can do is advance a culture of mutuality. We need to inculcate a sense of accountability between individual policyholders and a diverse range of financial institutions. For that reason, I support the potential for Northern Rock to revert to building society status once it has been stabilised financially. Promotion of as diverse as possible a financial services ecosystem should be a goal of future policy. Ethical values should come from individuals rather than resulting from a hostility which, inevitably, will be mounted against any all-powerful regulator. We should not expect too much from regulation. The buck must stop with all of us as consumers.
	Regulation creates barriers to entry and promotes the large and bureaucratic over the small and innovative. A competitive free market can be promoted only by the re-establishment of less concentration among all institutions in the financial sphere. Ultimately, that means allowing companies-even huge players like Lehman Brothers-to fail. The interests of depositors and retail investors should be protected from such an eventuality, but not the bondholders. Protection of the latter is one reason for the problem not going away any time soon.
	A healthy, competitive and innovative capitalist system requires risk-taking, which is why shareholders and bondholders should not naturally expect such blanket protection. The trouble is that too much of the current debate on banking regulation, as shown by the Bill, focuses on how we should have stopped the last crash. That has not been helped by a Government whose recent economic policy pronouncements are governed less by the national interest and more by a scorched earth policy, designed to limit the room for manoeuvre for years to come of any incoming Government.
	We would do better to turn our attention to how best to create a future global financial system that will be trusted by today's children investing in the decades ahead in anticipation of a long, secure retirement income.

Sally Keeble: I welcome the chance to speak after the hon. Member for Cities of London and Westminster (Mr. Field) who obviously has the interests of the financial services sector at the heart of his constituency. In my constituency, we have part of Nationwide, and Barclaycard is next door, so I also have a strong financial services lobby. All of us of course also have constituents who are entirely dependent on the maintenance of a secure financial system, both for their own jobs and for financial services, such as pensions and mortgages. For that reason, although this Bill is phenomenally technical, it goes to the heart of what our constituents want to see happen, and that is why it is right that the Government should include it in their legislative programme.
	The Government have to introduce the measures that they think right, and I agree with the separation of the Bank of England and the FSA, as set out in the Bill. The Government should not look to the pending election and ask What are the policies of the Opposition? and, depending on the answer, do nothing or do what they say. The Government should persist with the course of action that they think fit.
	The origins of the debate, dating back to 1997, were mentioned at the outset. That was when the supervision of the banks was taken away from the Bank of England. It has been talked about as if that was the only thing that happened on that occasion, but it was not. The key factor was the Bank of England being given independence and control over the setting of interest rates. That was a phenomenally powerful tool to give the Bank, which had previously been jealously preserved by the Chancellor. It was a profound decision that affected all our constituents. Giving those powers to the Bank of England was a dramatic move and one that proved to be extremely successful. Control over interest rates was the key to controlling inflation, which at the time was public financial enemy No. 1. It made perfect sense to transfer that power, and the FSA was then set up to deal with the regulatory issues.
	Over the years, we have had debates about what was done, and questions were asked about the wisdom of some of the moves. I have been on the Treasury Committee for four years, so I came in at the tail end of some of those debates. It was when things were starting to get a bit bumpy, because we had big debates about asset prices, especially property. Most of those debates, and the pressure put on the Governor, came from Members of Parliament, especially my hon. Friend the Member for Edmonton (Mr. Love). I did not tell him that I intended to mention him, but as I am flattering him, I hope that he will not mind. He repeatedly pressed that issue.
	We also had a lot of discussion about the dislocation of the bank's rate from the interest rates as all of our constituents experienced them, especially over the past 18 months to two years. There were strong debates about the difference between the consumer prices index and the retail prices index, and why the public did not agree with the Governor's view of the rate of inflation. Many of those issues were a start in considering whether the system as set up in 1997 would hold for the next 10 or 20 years.
	In fact, quite often over the past few years, the Select Committee almost got to the point of spotting what would lead to the collapse. When we looked at some financial products-we looked at collateralised debt obligations, or CDOs, but not CDOs squared-questions were asked about their construction, what they meant, what underpinned them, what their creditworthiness was, and so on. However, we did not push as hard as was perhaps needed to see what was happening. The Governor certainly never warned of exactly what was happening. I noticed that although the hon. Member for Tatton (Mr. Osborne) referred to asset prices, he did not read out any clear warning from the Governor- or, indeed, from anyone else-about the scale of the collapse that was coming down the line; and indeed, the FSA chair and chief exec at the time did not warn about it either.
	When the collapse came, those of us on the Select Committee virtually had a ringside seat. The tripartite authority was caught out, albeit not because of anything inherent in its structure, but because of the speed and scale of the collapse. People could see the asset price bubbles and the complex financial products, although nobody quite knew what was in those products. Indeed, at one Committee meeting I remember people talking about how they would unwrap a layer to see what was under them, find that there was nothing at all and then pass them on as quickly as they could, before they ended up on their books.

Mark Field: Although I share the hon. Lady's view that the tripartite system in itself was not the main cause of everything collapsing, does she share the Opposition's concern that the Treasury turned a blind eye and did not warn anyone, in the way that probably none of us in politics did, because the money pouring in from the City was obviously attractive and because financial services brought huge income into the Treasury's coffers? The core question is: where did responsibility lie? However, when that question was asked of the Governor of the Bank of England, answer came there none.

Sally Keeble: I completely agree. There have been issues about what happened. The question that I was working towards is: how do we put it right? Everybody agrees that things went wrong, and everybody agrees that when the crisis came, the tripartite authority did not manage to resolve the issue in a very clever fashion. We heard all the accounts and all the evidence is there in the reports. The primary issue was not so much that the people involved were having a bust-up, but that the speed, scale and unexpectedness of the collapse caught everybody by surprise. In particular, as soon as the collapse hit the public and they started the run on Northern Rock, a domino effect could have moved quickly through our financial services, had the Government not also moved quickly, which they did. They did so after the collapse of Lehman Brothers as well.
	Given what happened, how do we put things right? I do not see that as a huge party political dividing line; I see it as a matter of trying to work out a sensible way to deal with what was a huge problem. However, just to say, The relationships are dysfunctional; therefore we have to abolish or change everything, as the hon. Member for Tatton did, is not something that I buy into. That was the bottom line of his arguments, and I simply do not accept them. A number of issues have to be dealt with or thought through before we start talking about dismantling the FSA-or rather, not so much dismantling it, but tacking it wholesale on to the Bank of England.
	First, there are serious conflicts of interest in having an organisation that uses the monetary policy tools that the Governor now has at his disposal, including quantitative easing, and that also supervises the banks. We could create Chinese walls and separations within the organisation, but given the importance of the subject and the order of the issues being dealt with, it is much better for those different functions to be more clearly separated.
	The second thing-it has grown out of the crisis and we have all had to learn about it-is that the public are now much more demanding about scrutiny and transparency. The hon. Member for Twickenham (Dr. Cable) talked about the banks' obligations on lending rates, which have not been restored to what they were. I do not think that the public are going to accept that one organisation, although it has responsibilities to report to different organisations, is likely to have the most wonderful culture of openness and scrutiny by the general public. I do not think that it will provide the kind of openness that the public will demand for the next 10 to 20 years.
	I always remember the time when the Governor came before the Select Committee to talk about what was happening with Northern Rock. He spoke in terms of, If only the Bank had been able to carry out a covert operation. I had visions of somebody with a big bag of cash running out of the Bank of England towards Northern Rock, and I wondered how on earth that could be done in the modern day and age. Just recently, of course, the Bank has managed to carry out such operations, which is quite remarkable. It is interesting that the debate then starts to be about where the public accountability, scrutiny and answering lies for what the Bank and others are doing with public funds. We need a structure that will allow us to answer those questions. Splitting the FSA into separate organisations will not help; it already has a culture of openness that will help it to provide better answers.
	Placing all the functions into just the Bank creates the problem that it might become too big an organisation. We have all talked about being too big and too important to fail and all the rest of it, but having one body deciding quantitative easing, interest rates, the education of the public, bank supervision, old Uncle Tom Cobleigh and all involves too many functions for one organisation.
	Most importantly-this explains my question to the hon. Member for Tatton, and both the Governor and the FSA said this-the issue is not just about who sits where but about what they do. Although there has been much discussion about reorganising structures, we also need to discuss the new tools that can be used to fix the current problems. It is much better to improve the structures we already have and focus on getting tools-other than the capital ratios that everybody has talked about a great deal-to try to tackle the problems we are going to face over the next 10 to 20 years.
	Apart from that, there some very important measures in this Bill, which go right to heart of the public debate. People have talked about bankers' pay, which is a major public concern. There is also a real awareness of the importance of the international regulations. I was pleased to hear my right hon. Friend the Chancellor speak about them in his opening address. I was particularly pleased to hear what he said about the credit ratings agencies-some of the real culprits in all this when they went on advising people about putting together hopelessly complex products and provided ratings for them. That then encouraged people to sell them when they were, in fact, houses of straw. I also greatly welcome the measures on consumer protection, particularly on the credit card cheques, in respect of which many hon. Members of all parties have campaigned for extra controls.
	Nobody has mentioned clause 29, which I am particularly pleased to see in the Bill. It gives extra powers to the Financial Services Compensation Scheme. In all the disasters around financial services over the past couple of years, the Financial Services Compensation Scheme is just about the one organisation that has been extremely efficient and has managed to ensure with record speed that people have received the compensation owed to them. I am sure that the Financial Secretary will mention this in his concluding speech, but the clause would make it possible for the FSCS to ensure on an agency basis that all the customers of the Icelandic banks, for example, get paid out. That would mean that the money of overseas customers, or United Kingdom customers with accounts abroad, would be protected as well. I think that it would cover all internet banking as well, but perhaps my hon. Friend the Economic Secretary will clarify that point when he winds up the debate. In any event, it is a small but important measure.
	I welcome the Bill, which I think will provide a way through a difficult situation and will help to put the regulation of our financial services on to a more secure footing in years to come.

Mark Hoban: We have had a thoughtful but rather low-key debate. That is surprising, given that the Bill is meant to be the central plank of the Government's strategy in the run-up to the next general election. There seemed to be no passionate desire among Labour Members to defend the existing structure of regulation in the United Kingdom, and they seemed to have no real confidence in their arguments. When Labour Members discuss the reforms that Conservative Members have proposed, there are no discussions about whether they are right or wrong in principle; we are merely told that they might be quite difficult to implement. That hardly suggests that Labour Members have confidence in the structure of which the Prime Minister himself was the author in 1997.
	My hon. Friend the Member for Wimbledon (Stephen Hammond) spoke of the link between the financial crisis in this country and the economic crisis that we have experienced during what has been the longest and deepest recession since the 1930s. That point was echoed by the hon. Member for Halton (Derek Twigg), who reflected on the experience of his constituents and on the link between the problems of businesses and households and the financial crisis.
	It is important to ensure that we produce the right response to the problems that we have seen over the last two or three years. Taxpayers have had to stump up billions of pounds in guarantees for the financial services sector. People have lost their houses, and businesses are under threat. We need to establish whether our current regulatory system has failed, and if it has failed-as we believe it has-we need to think about the right way in which to introduce reforms.
	My hon. Friend the Member for Henley (John Howell) referred to the confusion that has arisen from the FSA's being given the objective of financial stability. Those of us who are veterans of the proceedings on the Bill that became the Banking Act 2009-such as the hon. Member for South Derbyshire (Mr. Todd), the Economic Secretary to the Treasury and the hon. Member for Northampton, North (Ms Keeble)-will recall our debate about financial stability. We discussed the problems involved in giving the Bank a responsibility for which there was no definition, and giving the Bank a responsibility without, necessarily, any additional powers to implement that objective. We also debated whether or not financial stability should be an objective for the FSA.
	On that occasion, the hon. Member for Wallasey (Angela Eagle), then Exchequer Secretary, responded by saying:
	the FSA has important objectives in relation to financial stability and the Financial Services and Markets Act 2000, which has a direct bearing on what we are talking about. For example, the FSA has a responsibility for maintaining market confidence in the financial system. That, too, is about financial stability. --[ Official Report, Banking Public Bill Committee, 30 October 2008; c. 232.]
	It appears that last year the Government were very clear about the fact that the FSA had responsibility for financial stability. This year they appear to have changed their mind. I wonder whether that has just a little to do with the problem that affects the Bill. The Government are focusing on cosmetic changes, producing the illusion of activity and reform without making any substantial alterations.
	My hon. Friend the Member for Cities of London and Westminster (Mr. Field) expressed concern about the contractual relationship between employer and employee. The hon. Member for South Derbyshire raised a similar issue last year during the debate on what was then the Banking Bill. My hon. Friend also spoke of imbalances between the economies in the far east with current account surpluses, the role that they had played in supplying funds to London and New York and acting as intermediaries in the financial services markets in those two centres, and how that had fed the growth in credits and led to the asset price bubble that has burst to the cost of families and businesses across the country. He also touched upon the need to understand complex financial products. I think we would all agree that regulators and businesses failed to understand the nature of the risks in respect of these products, and the consequences of those risks when people were taking up products such as collateralised debt obligations, and CDOs squared, on a large scale.
	The hon. Member for Coventry, North-West (Mr. Robinson)-who made a late bid to serve on the Public Bill Committee, if the Government Whip is looking for a volunteer alongside the hon. Member for South Derbyshire-was critical of the appointment of Michel Barnier as the Commissioner responsible for internal markets, who has jurisdiction over financial services. We may well turn to this in more detail in the debate tomorrow on the Commission's proposals for reforming the architecture of financial supervision in the European Union.
	The hon. Member for Coventry, North-West was right to be critical of that appointment. I sometimes get the sense in discussions on European financial services that the Treasury has let a matter rest for a long time and then rides in like the seventh cavalry, but ultimately fails to change things. We have had a flurry of activity over the past few days, with the Prime Minister and others trying to persuade President Barroso that Michel Barnier should not be appointed a Commissioner. All came to nought, however, because the Treasury and the Government did not wake up to the risks until it was too late. I fear that we will see the consequences of that inactivity over the course of the life of the Commission.
	The hon. Member for South Derbyshire spoke about employment rights, and he referred to the Bill as a portmanteau Bill. That is an apt description, as it highlights the fact that it is a hotch-potch collection of provisions that lacks a coherent theme. It does not really address the financial crisis, or some of the consumer credit issues that a number of Members have discussed during the debate. He asked, rather cynically, Well, what do the people who argue in favour of your Conservative reforms want? I am not entirely sure what Jacques de Larosière, Austan Goolsbee or Stanley Fischer want from a Conservative Government, and I do not know what is in our gift to give them. However, the fact that they recognise that there needs to be significant reform of financial regulation, and that more powers need to be given to central banks over the regulation of the financial services sector, demonstrates that our proposed reforms go with the grain of international debate.
	The hon. Member for Halton (Derek Twigg) talked about the impact of the financial crisis on the economy and on families and businesses in his area. That reminds us of the need to get the regulatory system right in order to minimise the risk of such crises arising again. He also referred to the indefensible practice of credit card cheques. Whenever I talk to people from the credit card sector, I always listen with fascination to their defence of these cheques, but there is no credible defence, and they should be scrapped.
	The hon. Member for Northampton, North was the only Member on the Government Benches to offer even a slight defence of the existing regulatory regime. She gave an account of the discussions the Treasury Committee had with the Bank of England and others about complex products and the credit bubble. Part of the problem was that no one really had responsibility for financial stability or for working out what the impact of these risks would be on the financial system and the wider economy. That points to the gap in the system of financial regulation, which the Prime Minister established in the late '90s. No one had that responsibility, and sadly, the Bill does not address that fundamental problem.
	There are no significant measures in the Bill that demonstrate that the Government have learned the lessons from having seen the first run on a UK bank in living memory. There appears to be nothing in the Bill that would prevent that from happening again. Secondly, our economy as a whole has been massively over-leveraged because nobody took responsibility for macro-prudential regulation and the maintenance of financial stability. It now appears that the Bank and the FSA share that responsibility without there being any clarity as to what that means, and what they will do in practice. It is all still to take place within the framework of the tripartite arrangements set up in the late 1990s. We know from the criticism of those arrangements how badly they have worked. We still do not know who, in the final analysis, has responsibility for financial stability: is it the Bank, the FSA-or, indeed, the Chancellor of the Exchequer? We have gone from a situation where nobody had responsibility to one where everyone has responsibility, but neither is a satisfactory outcome.
	It is not just banks that were over-leveraged; consumers were, too. Our consumers were more highly leveraged than those in America, and personal debt in the UK is equal to that in France and Germany combined. Where are the measures in the Bill to address that? As I said, we welcome the measures to ban unsolicited credit card cheques, but we have long called for the Government to go further in tackling some of the issues relating to consumer credit and rebuilding the savings culture in this country.
	This financial crisis has wreaked devastation on consumers, families and businesses. We have seen the mis-selling of structured products, falling interest rates for savers and pensioners, and an increasingly concentrated banking sector. Again, nothing in this Bill gets to the root of why regulation is failing consumers. We welcome the measures in the Bill on collective redress and class actions, but it says something about the weakness of the regulatory structure that we have to find mechanisms for consumers to hold product providers to account. Where is the FSA or the Financial Ombudsman Service failing, if we need to give consumers those powers? We need to examine some of the fundamental failures in consumer regulation if we are to get this right.
	The Bill fails to address the weaknesses in the regulatory structure and demonstrates the Government's failure to undertake the fundamental reform of financial regulation that we so desperately need. It is a long list of measures that are, in part, cosmetic; it is a restatement of what is already happening, rather than reform to address the structural failures entrenched in the reforms of 1997.
	A number of Conservative Members have asked whether the Bill is about cosmetic change or about change to the architecture, and whether it is substantial or merely a rebranding. Parts of the Bill remind me of one of those TV makeover shows: people come in and there is a blaze of activity for a short time-new paint is put on the walls and a few new lampshades and carpets are put in-yet the reality is that we still have the leaky roof, the rocky foundations and the dodgy walls. They remain unchanged as the makeover team moves off, leaving the real problems behind for someone else to sort out.
	What the people of this country need is real change, not some tacky makeover from a Government running out of steam, caught out by their own failings but lacking the courage to own up to their mistakes and scrap the system that they set up. The Bill does contain measures that we will support, but they need more scrutiny, because they are being railroaded through the House by a Government afraid of robust scrutiny of the new powers being taken by the FSA.
	These welcome measures should not obscure the fact that the Government could have used this Bill to achieve fundamental reform of the regulation of the financial services sector. It could have been used to establish clear lines of responsibility for maintaining financial stability and it could have dealt with the fundamental structural weaknesses in the system that the Prime Minister set up in 1997, but instead it has entrenched the problems of the past, ducking the questions about who should be in charge and avoiding real reforms that would have given real protection to consumers.
	We require wholesale structural and institutional reforms with a fresh approach to regulation and supervision. The Conservatives have put forward detailed proposals that learn the right lessons from this financial crisis and would put us on a sustainable footing going forward. Instead of defending the tripartite structure, as the Government are forced to do, we would scrap the FSA and give the Bank of England enhanced powers over prudential regulation, thereby leaving nobody in doubt as to who is in charge. Instead of having a single organisation trying to tackle financial stability and protect consumers, we would create a consumer protection agency to act as a consumer champion.
	What a shame that the Government will not admit their mistakes, will not own up to their failings, and instead blame everyone but themselves. It is clear that while this Government are in charge, we will not get the real reforms that this country needs; all we will see are cosmetic changes saving the face of the Prime Minister-the architect of the system that has so badly let down households and businesses across this country. It is becoming increasingly clear that the Government are incapable of learning and incapable of implementing the change that this country needs. Only a general election can bring about real and substantial reforms to the architecture of financial regulation to ensure that we give better protection to consumers, learn the lessons of the excesses of the past decade and put this country back on the right track.

Ian Pearson: The global financial crisis has led countries across the world fundamentally to review financial systems and their interaction with the broader economy. Last year and earlier this year, we ensured that the UK authorities had the power to deal with failing banks while continuing to protect consumers and taxpayers. Our economy needs well-managed, well-functioning banks and financial institutions to perform a vital set of functions, channelling investment and helping people to save and plan for the future.
	Although a prosperous financial sector is in everyone's interests, so too is a stable one. Through this Bill, we have an opportunity to strengthen the financial framework so that the UK not only addresses the effects of the crisis but harnesses the lessons of the past two years, ensuring that in future any crises will not only be less damaging but less likely altogether. The Government's aim is simple: to ensure that the financial system that emerges from the crisis is not only built on a stronger and sounder footing but is fairer and works for consumers.
	The tone of the comments made by the hon. Member for Fareham (Mr. Hoban) stood in stark contrast with those of the shadow Chancellor. I got the impression that the shadow Chancellor had thought deeply about this and that he disagreed with us on one fundamental issue to do with the structure of regulation, but agreed with large elements of the Bill. He said so. He said that recovery and resolution plans were a good idea and he supported lots of other elements of the Bill. However, I did not hear a shred of evidence to support the idea that the fundamental wholesale reform suggested by the hon. Member for Fareham would produce any benefits for consumers and investors.
	It is clear that when it comes to structure there is a fundamental disagreement between the Government and the Opposition. The Opposition have made their views on the institutional framework clear, but their suggestion that if we had handed the FSA lock, stock and barrel back to the Bank of England we would have prevented the financial crisis, or would prevent a future one, is simply misguided. Putting together responsibility for regulating not just the big banks but the small ones-the smallest building societies, individual financial advisers and the smallest credit unions-does not make strategic sense. Many different institutions and frameworks exist in different countries across the world, but no model of financial regulation has been successful in fully insulating any country from the crisis.
	The shadow Chancellor and the hon. Member for Fareham cited a number of people who support their view. We can do the same. The simple fact is that there is no perfect supervisory architecture. My hon. Friend the Member for Coventry, North-West (Mr. Robinson) quoted Andrew Large, who knows a lot about these matters. The solution, to my mind, is not to rearrange the responsibilities of those with a role to play in preserving financial stability, but to ensure that all responsible parties have the right tools at their disposal to maintain financial stability and that the right framework exists to ensure effective co-ordination of the authorities' activities.
	We should not be talking, as the Opposition are, about shifting the deckchairs. We should be talking about strengthening the deckchairs so that they can carry the weight that we all now realise is required of them. It matters not who does the job, but that the job is done effectively and the institutional framework is clear and coherent.
	At this critical time, we need the authorities to focus on reducing risk, not on having to deal with the disruption and uncertainty caused by unnecessary institutional upheaval. The hon. Member for Twickenham (Dr. Cable) made a valid point when he warned of the dangers that significant institutional upheaval could bring. Instead, by introducing the Council for Financial Stability, we propose a change from the existing standing committee arrangements. The council will be responsible for considering emerging risks to financial stability and co-ordinating an appropriate response by the UK's authorities. Most important, it will place financial stability arrangements on a more formal, transparent and accountable basis.
	A second crucial element of the Bill relates to recovery and resolution plans, or living wills.

Oliver Letwin: Will the hon. Gentleman give way?

Ian Pearson: I would happily give way to a Member who has sat through the debate, rather than one who turned up two minutes ago. I should like to reply to the comments that a number of hon. Members have made.
	Recovery and resolution plans will help to ensure that no bank is too complex, too interconnected or too big to fail, thereby going a long way towards addressing the moral hazard problem that is particularly prevalent among systemically significant firms. The plans are key to ensuring that such firms can no longer rely on an implied public subsidy. In response to the hon. Member for Wimbledon (Stephen Hammond) who, among others, raised the issue: yes, it is an ambitious programme of work. We are talking about complex financial institutions, but our proposals are not unworkable and we need to make sure we get the detail right.
	The recovery and resolution plans are only one element of the Government's comprehensive policy to deal with the systemic risk posed by firms. The policy includes tougher prudential regulation.

Stephen Hammond: Will the Minister give way?

Ian Pearson: I happily give way to the hon. Gentleman.

Stephen Hammond: The Minister cited my contribution to the debate, but he glossed over my point. He said that he wants to make the plans workable but he has given no detail. A number of problems have been raised to show the risk that the proposals may be made completely inoperable by the complex nature of companies' financial structures, but he has yet again glossed over that point.

Ian Pearson: I shall be happy to go into detail with the hon. Gentleman in Committee. The shadow Chancellor said that recovery and resolution plans were a good idea. As hon. Members know, on Second Reading we debate the principle of the measure, and the principle of the plans has been welcomed on both sides of the House.
	The third crucial element of the Bill is remuneration. The Bill relates to improved corporate governance, which goes hand in hand with a strengthened regulatory framework. There is general consensus that remuneration practices in the financial services sector were a contributory factor in the recent financial crisis. That is why we are taking decisive action to tackle remuneration practices that incentivise excessive risk taking.
	There are proposals in the Bill to enhance control of the system of rewards on the one hand and transparency of disclosure on the other. We are strengthening the FSA's hand as a regulator to take action against remuneration policies that encourage excessive risk taking, and ensuring greater accountability of the FSA to the Government in that area. The hon. Member for Twickenham asked whether we actually needed such legislation and suggested that the FSA could already take action. No, it cannot. We are imposing a duty on the FSA to make rules requiring some authorised persons to have a remuneration policy and to implement it, and to ensure that remuneration policies are consistent with the effective management of risk and the Financial Stability Board international implementation standards as agreed by the G20 leaders at Pittsburgh. It is fundamentally important that we do so.
	The shadow Chancellor and others asked about the power that we have proposed in that area and about concerns expressed by Lord Woolf. The power that we are proposing is not a power to interfere with existing contracts-the FSA is not being given retrospective powers. As a public authority, its actions are required to be compatible with the rights in the European convention on human rights, which are protected by the Human Rights Act 1998.
	In addition to what we are doing to strengthen the FSA's hand, we are, where appropriate, taking action to implement in full Sir David Walker's recommendations on disclosure and transparency. The hon. Member for Cities of London and Westminster (Mr. Field) raised points about remuneration, and, happily, I am sure that we will discuss them further in Committee. Through our proposals on disclosure, we are trying to support shareholders' ability to exercise effective oversight of the remuneration paid in the companies in which they invest. As my right hon. Friend the Chancellor said, the first line of defence is well-managed companies, with directors taking responsible decisions about risk, effectively overseen by active shareholders. Through the Bill, the Government will have a power to make regulations to implement the Walker recommendations, which will naturally be subject to full consultation.
	The fourth crucial element of the Bill is the measures designed to support and protect consumers. My hon. Friends the Members for Halton (Derek Twigg), for South Derbyshire (Mr. Todd) and for Northampton, North (Ms Keeble) made specific reference to the consumer financial education body and the powers on collective redress. Hon. Friends who serve on the Select Committee that deals with the issue made broader comments, which we will happily debate in Committee. It is important that the FSA can establish a new consumer financial education body to provide strategic leadership and increase the profile of the financial education and capability agenda. It is also important to recognise that the recession has had the greatest impact on those who are most vulnerable in our society. We are committed to improving access to financial guidance and education to address these issues.  [Interruption.]

Mr. Deputy Speaker: Order. I am sorry to interrupt the Minister. There is a rising tide of sedentary conversation, which is now starting to obtrude.

Ian Pearson: As my right hon. Friend the Chancellor announced, we also propose to introduce a representative body to bring action through the courts on behalf of groups of consumers. There have been representations from bodies that have concerns about what is being proposed. The proposals have been extensively consulted on. They are appropriate, and it is right that individuals have the power to band together to take class actions in the courts through a representative body. That power has limitations, which we have consulted on, and those are appropriate.
	The Bill will ensure that prudential regulation and supervision of firms are more effective. It will place greater emphasis on monitoring and managing system-wide risks, including by legislating for the new Council for Financial Stability. It will ensure that banking remuneration is more appropriate and, above all, more transparent. At the same time, it will ensure that consumers of financial products are better supported and protected. I commend the Bill to the House.
	 Question put and agreed to.
	 Bill accordingly read a Second Time.

Financial Services Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A (7) ),
	That the following provisions shall apply to the Financial Services Bill:
	 Committal 
	1. The Bill shall be committed to a Public Bill Committee.
	 Proceedings in Public Bill Committee 
	2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 14 January 2010.
	3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
	 Consideration and Third Reading 
	4. Proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
	5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
	6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and Third Reading.
	 Other proceedings 
	7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.-( Mr. Mudie.)
	 The House divided: Ayes 276, Noes 152.

Question accordingly agreed to.

Financial Services Bill (Money)

Queen's recommendation signified.
	 Motion made, and Question put forthwith (Standing Order No. 52 (1)(a) ),
	That, for the purposes of any Act resulting from the Financial Services Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred in consequence of the Act by a Minister of the Crown. -(Mr. Frank Roy.)
	 Question agreed to.

Financial Services Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52 (1)(a) ),
	That, for the purposes of any Act resulting from the Financial Services Bill, it is expedient to authorise-
	(1) the imposition of charges for the purpose of meeting expenses incurred by-
	(a) the consumer financial education body to be established by the Financial Services Authority,
	or
	(b) the scheme manager of the Financial Services Compensation Scheme, and
	(2) the charging of fees in connection with the application of Part 5 of the Banking Act 2009 to persons providing services forming part of inter-bank payment systems. -(Mr. Frank Roy.)
	 Question agreed to.

Business without Debate
	  
	Estimates

Motion made and Question put forthwith (Standing Order No. 145),
	That this House agrees with the Report [25 November] of the Liaison Committee. -(Mr. Frank Roy.)
	 Question agreed to.

DELEGATED LEGISLATION

Ordered,
	That the Costs in Criminal Cases (General) (Amendment) Regulations 2009 (S.I., 2009, No. 2720), dated 8 October 2009, be referred to a Delegated Legislation Committee. -(Mr. Frank Roy.)

REGIONAL SELECT COMMITTEE (LONDON)

Motion made,
	That Ms Karen Buck, Jeremy Corbyn, Clive Efford, Siobhain McDonagh and Mr Andy Slaughter be members of the London Regional Select Committee. -(Mr. Frank Roy.)

Hon. Members: Object.

SITTINGS OF THE HOUSE

Motion made ,
	That-
	(1) Standing Order No. 14 (Arrangement of public business) shall have effect for this Session with the following modifications, namely:
	In paragraph (4) the word 'eight' shall be substituted for the word 'thirteen' in line 42 and in paragraph (5) the word 'fifth' shall be substituted for the word 'eighth' in line 44;
	(2) Standing Order No. 90 (Second reading committees) shall have effect for this Session with the following modification, namely:
	In paragraph (2) the word 'fifth' shall be substituted for the word 'eighth' in line 21; and
	(3) Private Members' Bills shall have precedence over Government business on 29 January; 5 and 26 February; 5 and 12 March; 23 and 30 April; and 7 May. -(Mr. Frank Roy.)

Hon. Members: Object.

PETITIONS

Equitable Life (Mid-Worcestershire)

Peter Luff: It is my sad duty to present a petition on behalf of the constituents of Mid-Worcestershire regarding the Government's response to the parliamentary ombudsman's reports on Equitable Life. The petitioners are all directly or indirectly affected by the maladministration relating to the Equitable Life Assurance Society and the regulatory failure on the part of public bodies responsible. They have suffered grave injustice as a result, but have yet to receive any compensation for the resulting losses.
	I strongly associate myself with the petitioners, who state:
	The Petitioners therefore request that the House of Commons urges the Government to uphold the constitutional standing of the Parliamentary Ombudsman by complying with the findings and recommendations of her Report upon Equitable Life.
	 Following is the full text of the petition:
	 [The Petition of residents of the constituency of Mid-Worcestershire in the West Midlands region of the UK regarding the Government's response to the Parliamentary Ombudsman's reports on Equitable Life,
	 Declares that the Petitioners either are or they represent or support members, former members or personal representatives of deceased members of the Equitable Life Assurance Society who have suffered maladministration leading to injustice, as found by the Parliamentary Ombudsman in her report upon Equitable Life, ordered by the House of Commons to be printed on 16 July 2008 and bearing reference number HC 815; and further declares that the Petitioners or those whom they represent or support have suffered regulatory failure on the part of the public bodies responsible from the year 1992 onwards, but have not received compensation for the resulting losses and outrage.
	 The Petitioners therefore request that the House of Commons urges the Government to uphold the constitutional standing of the Parliamentary Ombudsman by complying with the findings and recommendations of her Report upon Equitable Life.
	 And the Petitioners remain, etc.]
	[P000434]

Planning and Development (Essex)

Bob Spink: I fight fearlessly for my constituents against inappropriate planning applications, so I am delighted to present this petition on behalf of residents against a tennis club application. Of course, the club has the right to enhance its members' enjoyment of leisure facilities that they may from time to time choose to use. However, that right falls well below the rights of residents to a decent quality of life without disturbance to them and to wildlife, the massive parking and other problems that would be caused and the need to stop bad development alongside the beautiful and sensitive Hadleigh Castle country park green belt. I sincerely congratulate each and every one of the residents who have signed this petition to protect their environment.
	The petition states:
	The Petition of Darryl Godbold, Trish Lepulelei, local residents and others,
	Declares that the proposed development at the Hadleigh Tennis Club should be rejected because the new and much larger building, pathway and proposed new uses of the club would bring unacceptable problems, including parking, inaccessibility for the emergency services, increase in hard surfaces, increased demands on insufficient foul and surface water drainage capacity, conflict with wildlife, and possible further encroachment onto the green belt following improper green belt encroachment a few years ago for a new driveway; further declares it would bring about an unacceptable intensification of use in this residential cul-de-sac, including a bar, social and fund raising functions; and further declares that previous planning conditions to avoid street parking difficulties have not been honoured.
	The Petitioners therefore request that the House of Commons urge the Government to encourage Castle Point Borough Councillors, rather than officers, to consider this objection and Petition and to reject the application and to be held to account for their decision.
	And the Petitioners remain, etc.
	[P000435]

BRITISH WATERWAYS

Motion made, and Question proposed, That this House do now adjourn. -(Mr. Frank Roy.)

Lynda Waltho: A national treasure, a thriving 4,500 mile linear national park, a catalyst for regeneration and economic growth, a nature reserve accessible to millions of people and belonging to us all -these are just a few of the descriptions given to our canals and waterways travelling through 250 parliamentary constituencies and past 19 million people every day.
	When our navigable canal and river network began to develop in the form we know it today, Napoleon and Josephine were about to be divorced, Charles Darwin and Abraham Lincoln were new-borns, the vacuum, the phone and the car were yet to be invented, and the idea that working men-or any woman-might vote was unthinkable. A lot has changed in 200 years, and the canals and rivers that played a great part in the development of our industrial success are still with us. If they are going to be able to contribute to our next 200 years, they are in great need of development, maintenance and support.
	The last decade or so has seen a widely acknowledged renaissance of our waterways and canals, especially as the agents of regeneration of many city centres-such as Gas Street basin in Birmingham-and of rural areas, offering some of the greenest recreational facilities available in the UK. Since 1999, this Government have invested an unprecedented £750 million in the network, ensuring-alongside the work of an army of volunteers-that it is in a much better state now than at any time since world war two.
	As we are becoming more aware of the challenge of climate change, we are also seeing the potential of our waterways to alleviate flooding, to provide sanctuary for wildlife and alternative modes of transport, and even to generate clean energy. The most recent figures for visitors to our waterways, from 2008, show that some 3.4 million visits were made, and that the number of boaters on the network was the highest in modern times at 32,500. Of course, many businesses depend on the efficiency and maintenance of our waterways. The British Marine Foundation estimates that some 40 per cent. of its member companies have a direct business interest, including hire fleet companies, marina operators and narrow boat builders, all of which, of course, provide many jobs. Imagine, then, the confusion, fear and anger of so many people when they heard that this fantastic network is threatened once again with break-up, destruction and possible sell-off. Such feelings were so strong that within days, a petition of 9,000 names appeared on the Downing street website.
	Many of us thought that the battle for our waterways and the argument for their remaining in the public sector had already been won in 2007-the last time the Treasury turned its hungry eyes our way, especially to the British Waterways property portfolio, the sale of which has been estimated to be worth around £16 billion. It was viewed then not only as a welcome answer to Treasury shortfalls, but as a way of making good the gap in funding from the Department for Environment, Food and Rural Affairs in making payments to farmers via the Rural Payments Agency.
	In answer to this onslaught, a massive coalition of waterways users, businesses and parliamentarians was formed. After some battles, the threat receded, although not without some loss of grant, but at least the argument was won and the waterways were relatively safe once again within the public sector. However, in the wake of the global downturn we find ourselves once more on the defensive, and once more in the sights of those ever-hungry Treasury eyes.
	British Waterways is facing a cut in funding of some £10 million in the next financial year, reducing the available grant to £47.8 million. Government funding from DEFRA for England and Wales has been confirmed for the year 2010-11. The base level of grant will be cut from £57 million to £52.8 million, with £5 million already brought forward to 2008-09 as part of the Government's fiscal stimulus plan. This points to an effective year-on-year reduction of £4.6 million plus £5 million, equating to a cut of £9.6 million. The Inland Waterways Association has said that British Waterways' existing grant already fails to address an ongoing deficit of between £20 million and £30 million each year in the amount needed just to maintain the system in a steady state of repair. Any cuts will only exacerbate the situation.
	On top of that grant cut, the prospect of the rumoured sell-off of the British Waterways property portfolio has been a bitter blow to confidence. It is difficult to see the economic sense in such a move, as the portfolio provides BW with about £45 million in revenue, which equates to more than a third of the money that it needs to run the waterways properly and almost half the maintenance budget.

Charlotte Atkins: My hon. Friend will know of the serious breach of the Leek arm of the Caldon canal recently. Does she share my concern that if the property portfolio of British Waterways is taken away by the Government, on top of the cuts in the Department for Environment, Food and Rural Affairs grant, beautiful canals such as the Caldon will be returned to the dereliction from which they came in the early '70s?

Lynda Waltho: Indeed. I am well aware of the situation on the Caldon, which applies to many canals across the country. Should the maintenance decline, there will inevitably be safety problems and closures, so the situation is awkward across the country. It does not take a mathematician to predict that such a move would be disastrous to British Waterways' finances. It could only lead to waterways falling into dereliction and safety being compromised, and there would inevitably be closures.
	Many of us who are involved with the waterways see the move to sell the portfolio as a desperate measure, because as recently as April the operational efficiency review gave British Waterways a clean bill of health. It recognised that it had achieved significant growth in its canal-side portfolio, and there was no suggestion at all that it should be sold off. The only reason why Treasury officials returned to the matter like a dog to its favourite lamp post can be the plight of the public finances, yet the proceeds from the sale would make an insignificant contribution to reducing the national debt.

Bob Laxton: Does my hon. Friend agree that that dual pincer financial movement on British Waterways-the cut in the DEFRA grant and the sell-off of the property portfolio-would leave it in an impossible position and make a huge 200-year asset into a liability? Would she, like me, not be surprised if British Waterways were to say to the Government, We cannot afford to maintain this. This is your problem? The call upon the taxpayer would then be potentially quite large, and it would far outweigh any money that the Government, the Treasury or DEFRA would save or make from the sell-off.

Lynda Waltho: Absolutely. I agree entirely with my hon. Friend that it would represent a very short-term gain and a very long-term loss and problem for our waterways.
	Against the possible contribution to paying off the national debt, we must balance the potential losses of such a move, which would be devastating. Lost to us all would be all the public benefits that the Government have hitherto recognised, such as urban and rural regeneration, health and social developments and an expanding leisure facility. We would also lose the £750 million of taxpayers' money invested over the past 10 years, effectively cashing in our public asset-it is the equivalent of selling off a national park.

Peter Soulsby: On that point, does my hon. Friend agree that the Government can be very proud of the regeneration of the waterways and the investment that they have made in them since 1997? That is particularly characterised by the publication of Waterways for Tomorrow. Does she agree that the understanding of the matter, which is probably shared by DEFRA Ministers, needs also to be shared by Treasury Ministers?

Lynda Waltho: Absolutely. I am immensely proud of what the Government have done for investment in waterways. Indeed, the volunteers and the people who keep things going in my constituency and on the canals in the black country are aware of what the Government have done. The cut would represent a sell-off of not only the asset but of those volunteers' input and confidence. Furthermore, it represents effectively selling off a national treasure. That is what really hurts people.

Alun Michael: As a former Minister with responsibility for waterways, I want to ask whether my hon. Friend agrees that Ministers are too wise to make such a mistake. There is a third way: to put the assets and liabilities into a mutual public interest model, to the benefit of the Government, the public, the users, the economy and the environment. Is not that the right way forward?

Lynda Waltho: Absolutely. My right hon. Friend may have read my speech because I would like to deal with that possibility in a moment. That would be a fantastic way forward; indeed, British Waterways has proposed and consulted on that recently.
	Further losses and selling off a national treasure would also represent a sell-off of the volunteer effort, which has been built up over many years, especially in places such as my constituency. A few weeks ago, I celebrated the 25th anniversary of the Stourbridge navigation trust in the company of people such as Graham Debney, Chris Dyche and Graham Fisher, who work tirelessly to keep the canal and the navigation trust going. I value their input, and a sell-off would represent selling off that input. They are a truly magnificent set of volunteers and an example to us all.

Robert Flello: There is a further point to make. The effort and work of many of the volunteers have created the value of the assets. Selling them off would mean selling off something that has been created through the goodwill and dedication of people such as those in my hon. Friend's constituency and, indeed, in Stoke-on-Trent.

Lynda Waltho: I agree entirely. Such people cannot understand why the Government appear to want to throw away all the investment and the work, which they have helped achieve.

David Drew: My hon. Friend is making an excellent speech. Does she also accept that another group of people feels let down? I have tenants in my constituency who live in BW property. Those properties are being sold from underneath them, and that is unacceptable. That is not something for the future; it is happening now. It is time we did something about it.

Lynda Waltho: Absolutely. There are many stakeholders-not only users and volunteers but people's livelihoods and, as my hon. Friend says, homes are affected.

Judy Mallaber: May I mention another group? They protect not only what we have, but are such extraordinary enthusiasts-for example, the Friends of Cromford Canal-that they want to extend the current canal network. It would be tragic to lose their enthusiasm and energy.

Lynda Waltho: Again, I can do nothing but agree. Some people in the black country spend whole weeks maintaining parts of the network. For example, they keep tea rooms open, raise funds and so on day in, day out. We cannot let them down.
	One of the biggest issues is how we react to BW's aim of becoming self-sufficient. Hitherto, that aim was supported by the Government, but it will become unachievable and the system will be almost entirely dependent on the taxpayer. British Waterways will lose its autonomy and ability to prioritise investment. It is this point that I wish to develop because it is the area in which we have most to lose and most to gain.
	British Waterways has a vision, one which many of us share, and that is to become a third sector trust. Over time, this could actually get the cost of running the waterways off the Government's balance sheet. But it simply cannot be done overnight and would need the property portfolio to help support its operation.
	In British Waterways' 20:20 vision document, it states that
	by 2022 we aim to have a thriving and sustainable waterway network cherished by the public that shares a deep responsibility for its well being.
	It goes on to propose third sector status, which has the potential to offer many benefits, not least a new model of governance allowing stakeholders a greater participation and more transparent and secure funding arrangements with the Government by means of contracts and the harnessing of the support of volunteers and fundraisers who we have talked about tonight. British Waterways has consulted widely on its form and direction, aiming to respond in December and to feed into DEFRA's Waterways for Tomorrow paper, which details the Government's policy for the future of our waterways. To allow any sell-off at this stage would scupper any prospect of a sustainable future or indeed any meaningful future at all. It is therefore imperative that the Government give great attention to this plan or we risk selling off our heritage and mortgaging the future of our waterways.
	In conclusion, I can put it no better than Tony Hales, chairman of British Waterways, when he says:
	The private sector built the canals, the public sector rescued them and I believe the third sector can be their future.
	I hope that my hon. Friend the Minister can convince his colleagues in the Treasury to do just that and give us the future that we deserve.

Huw Irranca-Davies: I congratulate my hon. Friend the Member for Stourbridge (Lynda Waltho) and the numerous hon. Friends who have turned out to support her and the waterways. This is typical of debates on waterways, which are always well attended. These are truly the constant friends of the waterways.
	I know that my hon. Friend, as the treasurer of the all-party parliamentary waterways group, has been a staunch defender, over a long period, of our inland waterways and a supporter of the sterling work of the Stourbridge Navigation Trust, which has worked so hard to preserve the Stourbridge canal. I am sure that she and other Members will wish to join me in congratulating British Waterways on the rapid and professional way in which it dealt with the 2008 breach in, and closure of, a 2-mile stretch of that canal. That action saw the canal reopen after just 100 days. We saw similar decisive action, although not quite as rapid, in the case of the Monmouthshire and Brecon canal, which is also close to hon. Members' hearts.
	I shall do my best to deal with all the points that were raised and the many interventions, but I hope that hon. Members will understand it if I am unable to cover all of them in the limited time available. I noted the rare resurrection, in a different context, of the third-way concept by my hon. Friend and by my right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael).
	Since I became the Minister with responsibility for the waterways in 2008, I have made a number of ministerial visits to our inland waterways to see for myself the many ways in which this unique national asset-this treasure-can benefit local communities. I therefore welcome this opportunity to restate the Government's commitment to our waterways, which offer so much potential to contribute to our future well-being, and I would like to take this opportunity to inform the House that an additional £400,000 is being made available to British Waterways this year from the aggregates levy sustainability fund. Those resources will be used to modernise and automate the Lees and Old Mill locks on the River Lea, thus enabling the waterway to become an economically viable transport route, as well as a recreational route, for moving the large volume of aggregates that will be used during the fit-out period of the Olympic park transformation and the Olympic legacy phases.

Lindsay Hoyle: I understand how the River Lea will benefit, but does my hon. Friend agree that there is a danger that everything will be about London and the Olympics? Some of us represent areas with canals such as the Leeds and Liverpool canal, which runs through my constituency. I hope that he will ensure that we also get investment, as and when we need it in future.

Huw Irranca-Davies: My hon. Friend makes a valid point. We want to see investment spread throughout all parts of England and Wales. However, I am sure he would agree that, where we have such a significant opportunity to prove how vital the arteries of the waterways network are for transport as well as recreation, the investment that this Labour Government put in should be shown in a modern idiom such as the Olympic games. What we can see, from the investment at Prescott locks and in the Lea waterway stretch and so on, shows that we see the waterways as having a modern, vibrant and working future.
	I do not think that any hon. Member here this evening will doubt that we have seen a quite remarkable improvement in the waterways over the past 10 years, a period in which this Labour Government have invested significantly in the waterways, with some £800 million provided to British Waterways alone. It is worth emphasising that point, because it is not the only investment, but simply the investment in British Waterways. That investment, together with, as has been pointed out, the considerable efforts of waterway enthusiasts, who work so hard to restore and recreate our inland waterway network, has resulted in the waterways being in a better state now than they have been since the second world war.
	That is no small tribute to the constant urging and gentle pressure of the many hon. Members who have lobbied incessantly on behalf of the waterways network. Many of them are here this evening. I know that some hon. Members in the Chamber will have heard about the waterways renaissance many times, including from my lips, but it is important to recognise the priority that this Government have given, over a considerable period, to maintaining and enhancing our inland waterways, so that they can be enjoyed as they are today.
	I recognise that the level of future Government support for the waterways is a concern, particularly in the face of the current severe pressure on public finances, which we cannot ignore and which will remain for a number of years to come. It is therefore even more important that the waterways can demonstrate what they are delivering for our continued investment and why they should remain a priority. We are already working with our delivery partners, including British Waterways, to address those points. For example, we are gathering further evidence about the wide range of public benefits that the waterways already provide, in order better to identify all those who benefit and to be able to quantify this benefit in monetary terms. As just one example, British Waterways estimates that its waterways alone deliver benefits of some £500 million a year.
	Let me turn briefly to the point that my hon. Friend the Member for Stourbridge raised about the cut of £9.6 million and why it is not a cut of £9.6 million-this is not a conjurer's trick, but I will explain why it is not. DEFRA's grant in aid to British Waterways in 2010-11 is £52.8 million, which includes an additional £5 million that has been brought forward. The difference between that figure and the figure for 2009-10 is £4.6 million, which I acknowledge. That £4.6 million reduction in grant in aid has been necessary as part of the need to identify savings right across government-we are not immune from that-reflecting the current challenging fiscal environment.
	The Government recognise that the waterways are a tremendous asset, and we remain committed to maintaining them. We will continue to ensure that they are given due consideration in future discussions about the allocation of resources. Without the £5 million that was brought forward, British Waterways would not have been able to carry out some of the major works projects in this year's works programme. However, in addition, British Waterways has planned £10 million in efficiency savings, which will also go some way towards reducing the gap in funding from 2011-12. However, we all know that we are indeed entering a very difficult period and we must look at ways in which the waterways can be supported so they can continue to deliver on their very real potential.
	There is no easy way to close the gap between what we would like to spend on the waterways and the funding available for maintaining them from both the central Government and from commercial and other user sources. The next few years, let us make no bones about it, will be tough-they will be tough right across government-but that is why it is so important to raise awareness of what the waterways offer so that they gain wider support for delivering local and regional objectives and so that they can participate in third and private sector initiatives to mutual benefit.
	I therefore plan to launch a consultation on the Government's new strategy for the inland waterways for England and Wales, called Waterways for Everyone, before the Christmas recess. This will set out what the waterways deliver now and how we believe this might be built on to help us retain a vibrant and sustainable network into the future.

David Drew: I welcome what the Minister has said, but will he give me an assurance that that will include a moratorium on existing house sales, which seem to be coming forward and causing great consternation among tenants? It is surely right that they have some assurances as well.

Huw Irranca-Davies: I understand that my hon. Friend seeks an assurance, but I must not be premature in any announcement when discussions are taking place. I know my hon. Friend is trying to tempt me, but if he could be a little patient while the useful discussions across Government Departments are continuing, I hope to be able to bring the matter home.
	I am sure that hon. Members are, like me, already aware of the wide range of public benefits that the waterways offer. To provide just a few examples, I would mention their ability to stimulate regeneration in our towns and cities, their ability to be a focus for community activities and to provide open spaces for exercise and public enjoyment, their role in encouraging tourism, as green routes for commuters, as sources of employment and, of course, as a source of enjoyment for boaters together with the ancillary industries and businesses that boating supports.
	Our intention with the production of Waterways for Everyone is to stimulate and support the coming together of those who might benefit more from our waterways with those charged with managing them, thus enabling the waterways' potential to be realised and their future safeguarded. By working together across government-across national, regional and local government-and with third sector and business partners, we can capture the cross-cutting and multi-functional nature of what waterways contribute to our quality of life. We are committed to making sure that the benefits from public support for the waterways are more widely felt.

Peter Soulsby: Does the Minister accept that if the source of partnerships he mentions are to be meaningful and if British Waterways is to play a full part in leading those partnerships, it needs to be able to bring to the table the property assets that it has at the moment so that those assets can be used as part of the partnerships in the very constructive ways that my hon. Friend the Member for Stourbridge (Lynda Waltho) has described?

Huw Irranca-Davies: I understand why my hon. Friend is tempting me down this path to make a statement, but may I assure my hon. Friends that the Government always keep national assets under review, but that no decisions have been made regarding the disposal of assets other than those already announced?
	I know that the strategy I referred to will not immediately reduce the anxiety of those who love our waterways and who have contributed to getting them in the condition they are today, but I also know that our waterways can play their part in helping us move out of recession through enhancing the value of development, through encouraging more people to holiday at home and through the creation of green jobs and volunteering activities.
	The Government will continue to support the waterway authorities that we grant-aid now, taking into account the need for tough prioritisation of taxpayer-funded resources over the next few years, but we must also look to all those with an interest in the waterways to recognise what they could do themselves, and to consider how their partnership involvement might strengthen the infrastructure on which public benefits depend. The potential is great for the future, but there are also risks if the resources to maintain these benefits are not collectively found.
	There are many challenges ahead in these tough and uncertain times, but I remain confident that the waterways have an important role to play for society, for the economy and for our natural and cultural environment, and I know that my hon. Friend the Member for Stourbridge and other hon. Friends in their places this evening will continue to argue vehemently that-
	 House adjourned without Question put (Standing Order No. 9(7)).